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Spending Biased Legislators - Discipline Through Disagreement

Author

Listed:
  • Facundo Piguillem

    (EIEF)

  • Alessandro Riboni

    (Ecole Polytechnique)

Abstract

This paper studies politicians who have a present-bias for spending; they want to increase current spending and procrastinate spending cuts. We argue that legislators' bias is more severe in economies with low institutional quality. We show that disagreement in legislatures leads to policy persistence and that this attenuates the temptation to overspend. Depending on the environment, legislators' decisions to be fiscally responsible may either complement or substitute other legislator's decisions. In economies with weak institutions, politicians' actions are strategic complements. Thus, institutional changes that induce fiscal responsibility are desirable, they generate a positive responsibility multiplier and reduce inefficient spending. However, in economies with better institutions, the same institutional change would induce some legislators to free ride on others' responsibility and may lead to more inefficient spending.

Suggested Citation

  • Facundo Piguillem & Alessandro Riboni, 2013. "Spending Biased Legislators - Discipline Through Disagreement," EIEF Working Papers Series 1317, Einaudi Institute for Economics and Finance (EIEF), revised Jul 2013.
  • Handle: RePEc:eie:wpaper:1317
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    References listed on IDEAS

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    Cited by:

    1. Bowen, T. Renee & Chen, Ying & Eraslan, Hülya & Zápal, Jan, 2017. "Efficiency of flexible budgetary institutions," Journal of Economic Theory, Elsevier, vol. 167(C), pages 148-176.
    2. repec:spr:ecogov:v:18:y:2017:i:2:d:10.1007_s10101-016-0189-x is not listed on IDEAS
    3. Nobuhiro Mizuno & Ryosuke Okazawa, 2017. "Within-group heterogeneity and civil war," Economics of Governance, Springer, vol. 18(2), pages 153-177, May.
    4. Jan Zapal, 2014. "Simple Markovian Equilibria in Dynamic Spatial Legislative Bargaining," CERGE-EI Working Papers wp515, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H00 - Public Economics - - General - - - General

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