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A Dynamic theory of electoral competition

  • Battaglini, Marco

We present a dynamic model of electoral competition to study the determinants of fiscal policy. In each period, two parties choose electoral platforms to maximize the expected number of elected representatives. The electoral platform includes public expenditure, redistributive transfers, the tax rate and the level of public debt. Voters cast their vote after seeing the platforms and elect representatives according to a majoritarian winner take all system. The level of debt, by affecting the budget constraint in future periods, creates a strategic linkage between electoral cycles. We characterize the Markov equilibrium of this game when public debt is the state variable, and study how Pareto efficiency depends on the electoral rule and the underlying fundamentals of the economy.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8633.

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Date of creation: Nov 2011
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Handle: RePEc:cpr:ceprdp:8633
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  1. Marina Azzimonti, 2009. "Barriers to investment in polarized societies," 2009 Meeting Papers 1233, Society for Economic Dynamics.
  2. Battaglini, Marco & Nunnari, Salvatore & Palfrey, Thomas, 2011. "Legislative bargaining and the dynamics of public investment," Discussion Papers, Research Unit: Market Behavior SP II 2011-205, Social Science Research Center Berlin (WZB).
  3. Jinhui Bai & Roger Lagunoff, 2007. "On the “Faustian” Dynamics of Policy and Political Power," Levine's Bibliography 122247000000001627, UCLA Department of Economics.
  4. Bard Harstad, 2012. "Climate Contracts: A Game of Emissions, Investments, Negotiations, and Renegotiations," Review of Economic Studies, Oxford University Press, vol. 79(4), pages 1527-1557.
  5. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
  6. Marco Battaglini & Stephen Coate, 2006. "A Dynamic Theory of Public Spending, Taxation and Debt," NBER Working Papers 12100, National Bureau of Economic Research, Inc.
  7. John Duggan & Tasos Kalandrakis, 2007. "Dynamic Legislative Policy Making," Wallis Working Papers WP45, University of Rochester - Wallis Institute of Political Economy.
  8. Daron Acemoglu & Mikhail Golosov & Aleh Tsyvinski, 2007. "Political Economy of Mechanisms," Levine's Bibliography 321307000000000886, UCLA Department of Economics.
  9. Torsten Persson & Guido Tabellini, 2004. "Constitutional Rules and Fiscal Policy Outcomes," American Economic Review, American Economic Association, vol. 94(1), pages 25-45, March.
  10. Ruediger Bachmann & Jinhui Bai, 2010. "Government Purchases Over the Business Cycle: the Role of Economic and Political Inequality," NBER Working Papers 16247, National Bureau of Economic Research, Inc.
  11. Jinhui H. Bai & Ruediger Bachmann, 2010. "Government Purchases Over the Business Cycle: the Role of Heterogeneity and Wealth Bias in Political Decision Making," 2010 Meeting Papers 621, Society for Economic Dynamics.
  12. Kalandrakis, Anastassios, 2004. "A three-player dynamic majoritarian bargaining game," Journal of Economic Theory, Elsevier, vol. 116(2), pages 294-322, June.
  13. Marco Battaglini & Salvatore Nunnari & Thomas Palfrey, 2012. "The Free Rider Problem: a Dynamic Analysis," NBER Working Papers 17926, National Bureau of Economic Research, Inc.
  14. Pierre Yared, 2010. "Politicians, Taxes and Debt," Review of Economic Studies, Oxford University Press, vol. 77(2), pages 806-840.
  15. David Austen-Smith, 2000. "Redistributing Income under Proportional Representation," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1235-1269, December.
  16. David Stromberg, 2008. "How the Electoral College Influences Campaigns and Policy: The Probability of Being Florida," American Economic Review, American Economic Association, vol. 98(3), pages 769-807, June.
  17. Coughlin, Peter & Nitzan, Shmuel, 1981. "Electoral outcomes with probabilistic voting and Nash social welfare maxima," Journal of Public Economics, Elsevier, vol. 15(1), pages 113-121, February.
  18. Marco Battaglini & Salvatore Nunnari & Thomas R. Palfrey, 2010. "Political Institutions and the Dynamics of Public Investment," Carlo Alberto Notebooks 142, Collegio Carlo Alberto.
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