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Debts and Deficits with Fragmented Fiscal Policymaking


  • Velasco, A.


This paper develops a political-economy model of fiscal policy - one in which government resources are a "common property" out of which interest groups can finance expenditures on their preferred items. This setup has striking macroeconomic implications. Transfers are higher than a benevolent planner would choose them to be; fiscal deficits emerge even when there are no reasons for intetemporal smoothing, and in the long run government debts tend to be excessively high; peculiar time profiles for transferscan emerge.

Suggested Citation

  • Velasco, A., 1998. "Debts and Deficits with Fragmented Fiscal Policymaking," Working Papers 98-06, C.V. Starr Center for Applied Economics, New York University.
  • Handle: RePEc:cvs:starer:98-06

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    References listed on IDEAS

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    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook


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