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Voting on the Budget Deficit

  • Alberto Alesina
  • Guido Tabellini

This paper analyzes a model in which different rational individuals vote over the composition and time profile of public spending. Potential disagreement between current and future majorities generates instability in the social choice function that aggregates individual preferences. In equilibrium a majority of the voters may favor a budget deficit. The size of the deficit under majority rule tends to be larger the greater is the polarization between current and potential future majorities. The paper also shows that the ex-ante efficient equilibrium of this model involves a balanced budget. A balanced budget amendment, however, is not durable under majority rule.

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File URL: http://www.nber.org/papers/w2759.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2759.

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Date of creation: Nov 1988
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Publication status: published as American Economic Review, vol. 80, no. 1, pp. 37-49, March 1990.
Handle: RePEc:nbr:nberwo:2759
Note: ME
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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