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Political Bias in Fiscal Policy Formation: an Econometric Analysis of Coalition Systems

  • Fabrizio Carmignani

    ()

    (Department of Economics, University of Milan-Bicocca and Department of Economics, University of Glasgow)

This paper provides a comprehensive econometric analysis of some debated issues concerning the political and institutional determinants of fiscal policy outcomes. Several innovative results are obtained. It turns out that a significant effect on fiscal policy formation can be traced back to the ideological orientation of the policymaker, to the degree of cabinet instability, to cross-country differences in electoral and budgetary institutions and to the dispersion of political power within the ruling coalition. Instead, the preferences of the median voter appear to have little importance. The evidence also rejects the theory of fiscal illusion in decision-making.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper28.pdf
File Function: First version, 2000
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Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 28.

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Length: 33 pages
Date of creation: Dec 2000
Date of revision: Dec 2000
Handle: RePEc:mib:wpaper:28
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  2. Luisa Lambertini, 2003. "Are Budget Deficits Used Strategically?," Boston College Working Papers in Economics 578, Boston College Department of Economics.
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  17. Robert E. Lucas Jr. & Nancy L. Stokey, 1982. "Optimal Fiscal and Monetary Policy in an Economy Without Capital," Discussion Papers 532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  18. Alesina, Alberto & Tabellini, Guido, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 403-14, July.
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