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Inefficiency in Legislative Policy-Making: A Dynamic Analysis

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Listed author(s):
  • Marco Battaglini
  • Stephen Coate

Abstract

This paper develops an infinite horizon model of public spending and taxation in which policy decisions are determined by legislative bargaining. The policy space incorporates both productive and distributive public spending and distortionary taxation. The productive spending is investing in a public good that benefits all citizens (e.g., national defense or air quality) and the distributive spending is district-specific transfers (e.g., pork barrel spending). Investment in the public good creates a dynamic linkage across policy-making periods. The analysis explores the dynamics of legislative policy choices, focusing on the efficiency of the steady state level of taxation and allocation of tax revenues. The model sheds new light on the efficiency of legislative policy-making and has a number of novel positive implications.

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File URL: http://www.nber.org/papers/w11495.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11495.

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Date of creation: Aug 2005
Publication status: published as Marco Battaglini & Stephen Coate, 2007. "Inefficiency in Legislative Policymaking: A Dynamic Analysis," American Economic Review, American Economic Association, vol. 97(1), pages 118-149, March.
Handle: RePEc:nbr:nberwo:11495
Note: PE POL
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  • D7 - Microeconomics - - Analysis of Collective Decision-Making

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