IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Debts and Deficits with Fragmented Fiscal Policymaking

Author Info

  • Andres Velasco
Registered author(s):

    Abstract

    This paper develops a political-economic 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; fiscal deficits emerge even when there are no reasons for intertemporal smoothing, and in the long run government debt tends to be excessively high; peculiar time profiles for transfers can emerge, with high positive net transfers early on giving way to high taxes later on; and multiple dynamic equilibrium paths can occur starting at the same initial level of government debt.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.nber.org/papers/w6286.pdf
    Download Restriction: no

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6286.

    as
    in new window

    Length:
    Date of creation: Nov 1997
    Date of revision:
    Publication status: published as Velasco, Andres. "Debts And Deficits With Fragmented Fiscal Policymaking," Journal of Public Economics, 2000, v76(1,Apr), 105-125.
    Handle: RePEc:nbr:nberwo:6286
    Note: PE
    Contact details of provider: Postal:
    National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.

    Phone: 617-868-3900
    Web page: http://www.nber.org
    Email:


    More information through EDIRC

    Keywords:

    Find related papers by JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H6 - Public Economics - - National Budget, Deficit, and Debt

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Buiter, W.H. & Corsetti, G. & Roubini, N., 1992. "Excessive Deficits: Sense and Nonsence in the Treaty of Maastricht," Papers 674, Yale - Economic Growth Center.
    2. V. V. Chari & Harold L. Cole, 1993. "A contribution to the theory of pork barrel spending," Staff Report 156, Federal Reserve Bank of Minneapolis.
    3. Carlos E. Zarazaga, 1993. "Hyperinflations and moral hazard in the appropriation of seigniorage," Working Papers 93-26, Federal Reserve Bank of Philadelphia.
    4. Cukierman, Alex & Edwards, Sebastian & Tabellini, Guido, 1992. "Seigniorage and Political Instability," American Economic Review, American Economic Association, vol. 82(3), pages 537-55, June.
    5. Robert Holzmann, 1991. "Budgetary Subsidies in Centrally Planned Economies in Transition," IMF Working Papers 91/11, International Monetary Fund.
    6. Chari V. V. & Kehoe Patrick J., 1993. "Sustainable Plans and Debt," Journal of Economic Theory, Elsevier, vol. 61(2), pages 230-261, December.
    7. Alberto Alesina & Ricardo Hausmann & Rudolf Hommes & Ernesto Stein, 1996. "Budget Institutions and Fiscal Performance in Latin America," NBER Working Papers 5586, National Bureau of Economic Research, Inc.
    8. Bizer, David S. & Durlauf, Steven N., 1990. "Testing the positive theory of government finance," Journal of Monetary Economics, Elsevier, vol. 26(1), pages 123-141, August.
    9. Alberto Alesina & Allan Drazen, 1989. "Why are Stabilizations Delayed?," NBER Working Papers 3053, National Bureau of Economic Research, Inc.
    10. Chari, V V & Kehoe, Patrick J, 1990. "Sustainable Plans," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 783-802, August.
    11. Ernesto H. Stein & Ernesto Talvi & Alejandro Grisanti, 1998. "Institutional Arrangements and Fiscal Performance: The Latin American Experience," IDB Publications (Working Papers) 6435, Inter-American Development Bank.
    12. Alesina, Alberto & Hausmann, Ricardo & Hommes, Rudolf & Stein, Ernesto H., 1996. "Budget institutions and fiscal performance in Latin America," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34295, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    13. Bulow, J. & Rogoff, K., 1988. "Sovereign Debt: Is To Forgive To Forget?," Working papers 8813, Wisconsin Madison - Social Systems.
    14. Aaron Tornell & Andres Velasco, 1995. "Money-Based versus Exchange Rate-Based Stabilization with Endogenous Fiscal Policy," NBER Working Papers 5300, National Bureau of Economic Research, Inc.
    15. Roubini, Nouriel, 1991. "Economic and political determinants of budget deficits in developing countries," Journal of International Money and Finance, Elsevier, vol. 10(1, Supple), pages S49-S72, March.
    16. Mariano Tommasi & Mark P. Jones & Pablo Sanguinetti, 1997. "Politics, Institutions, and Fiscal Performance in the Argentine Provinces," Working Papers 16, Universidad de San Andres, Departamento de Economia, revised Apr 2000.
    17. Aizenman, Joshua, 1992. "Competitive Externalities and the Optimal Seigniorage," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(1), pages 61-71, February.
    18. Rustichini, A, 1992. "Second Best Equilibria for Games of Joint Exploitation of a Productive Asset," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(2), pages 191-96, April.
    19. Sebastian Edwards & Guido Tabellini, 1990. "Explaining Fiscal Policies and Inflation in Developing Countries," NBER Working Papers 3493, National Bureau of Economic Research, Inc.
    20. Nouriel Roubini & Jeffrey Sachs, 1989. "Government Spending and Budget Deficits in the Industrial Economies," NBER Working Papers 2919, National Bureau of Economic Research, Inc.
    21. Alberto Alesina & Roberto Perotti, 1994. "The Political Economy of Budget Deficits," NBER Working Papers 4637, National Bureau of Economic Research, Inc.
    22. Tornell, Aaron & Velasco, Andes, 1992. "The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries?," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1208-31, December.
    Full references (including those not matched with items on IDEAS)

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    as in new window


    Cited by:

    1. Buchanan, James M. & Yoon, Yong J., 2004. "Majoritarian exploitation of the fiscal commons: general taxes-differential transfers," European Journal of Political Economy, Elsevier, vol. 20(1), pages 73-90, March.
    2. Bernardo Bortolotti & Paolo Pinotti, 2008. "Delayed privatization," Temi di discussione (Economic working papers) 663, Bank of Italy, Economic Research and International Relations Area.
    3. Charles R. Hankla, 2013. "Fragmented Legislatures and the Budget: Analyzing Presidential Democracies," Economics and Politics, Wiley Blackwell, vol. 25(2), pages 200-228, 07.
    4. Juan Carlos Echeverry & Jorge Alexander Bonilla & Andrés Moya, 2006. "Rigideces Institucionales y Flexibilidad Presupuestaria: Origen, Motivación y Efectos sobre el Presupuesto," IDB Publications (Working Papers) 9091, Inter-American Development Bank.
    5. Sell, Friedrich L., 2003. "Die Stabilitätsprogramme der EU: Anspruch und Wirklichkeit in den ersten vier Jahren der Europäischen Währungsunion," Working Papers in Economics 2003,2, Universität der Bundeswehr München, Economic Research Group.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Access and download statistics

    When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:6286. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.