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Voting on the Budget Deficit

Author

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  • Alesina, Alberto F
  • Tabellini, Guido

Abstract

This paper analyzes a model in which different rational individuals vote over the composition and time profile of public spending. Potential disagreement between current and future majorities generates instability in the social choice function that aggregates individual preferences. In equilibrium a majority of the voters may favor a budget deficit. The size of the deficit under majority rule tends to be larger, the greater is the polarization between current and potential future majorities. The paper also shows that the ex ante efficient equilibrium of this model involves a balanced budget. A balanced budget amendment, however, is not durable under majority rule.

Suggested Citation

  • Alesina, Alberto F & Tabellini, Guido, 1988. "Voting on the Budget Deficit," CEPR Discussion Papers 269, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:269
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    References listed on IDEAS

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    1. Kemal Dervis & Peter A. Petri, 1987. "The Macroeconomics of Successful Development: What Are The Lessons?," NBER Chapters,in: NBER Macroeconomics Annual 1987, Volume 2, pages 211-262 National Bureau of Economic Research, Inc.
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    3. Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1991. "The Pure Theory of Country Risk," NBER Chapters,in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 391-435 National Bureau of Economic Research, Inc.
    4. Buiter, Willem H, 1988. "Structural and Stabilization Aspects of Fiscal and Financial Policy in the Dependent Economy," Oxford Economic Papers, Oxford University Press, vol. 40(2), pages 220-245, June.
    5. Van Wijnbergen, Sweder, 1986. "Exchange rate management and stabilization policies in developing countries," Journal of Development Economics, Elsevier, pages 227-247.
    6. Buiter, Willem H., 1986. "Macroeconomic Responses by Developing Countries to Changes in External Economic Conditions," CEPR Discussion Papers 93, C.E.P.R. Discussion Papers.
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