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Devouring the Leviathan: fiscal policy and public expenditure in Colombia

  • Estrada, Fernando

Overall, this paper presents a white swan that seems to confirm the hypothesis of Alesina / Tabellini / Campante (2008). Fiscal policy in many developing countries is procyclical. Specifically, the former may explain monetary policy failures associated with problems of political agency. And in this case, the trend of the cycles is caused by voters who seek to devour the Leviathan by reducing their incomes. In these cases, voters observe the conditions of the economy, but not willing to cover the costs of corrupt governments. When they observe a boom, voters optimally demand more public goods or lower taxes, and this induces a procyclical bias in fiscal policy. The empirical evidence is consistent with this explanation: Procyclicality of fiscal policy is more pronounced in more corrupt democracies.

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File URL: http://mpra.ub.uni-muenchen.de/21981/1/MPRA_paper_21981.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 21981.

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Date of creation: 08 Apr 2010
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Handle: RePEc:pra:mprapa:21981
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  1. Alberto Alesina & Filipe R. Campante & Guido Tabellini, 2008. "Why is Fiscal Policy Often Procyclical?," Journal of the European Economic Association, MIT Press, vol. 6(5), pages 1006-1036, 09.
  2. Casarico, Alessandra & Devillanova, Carlo, 2008. "Capital-skill complementarity and the redistributive effects of Social Security Reform," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 672-683, April.
  3. Sen, Amartya, 1970. "The Impossibility of a Paretian Liberal," Journal of Political Economy, University of Chicago Press, vol. 78(1), pages 152-57, Jan.-Feb..
  4. Homero Cuevas, 1998. "Proceso político y bienestar social," Books, Universidad Externado de Colombia, Facultad de Economía, edition 1, volume 1, number 39.
  5. Sen, Amartya Kumar, 1970. "The Impossibility of a Paretian Liberal," Scholarly Articles 3612779, Harvard University Department of Economics.
  6. Vatter, Harold G & Walker, John F, 1986. "Real Public Sector Employment Growth, Wagner's Law, and Economic Growth in the United States," Public Finance = Finances publiques, , vol. 41(1), pages 116-38.
  7. Eduardo Wiesner, 2004. "El Origen Politico Del Deficit Fiscal En Colombia: El Contexto Institucional 20 Años Despues," DOCUMENTOS CEDE 002531, UNIVERSIDAD DE LOS ANDES-CEDE.
  8. Estrada, Fernando, 2005. "Estado mínimo, agencias de protección y control territorial
    [Minimum State, control agencies and Territorial protection]
    ," MPRA Paper 20172, University Library of Munich, Germany, revised 20 Jan 2010.
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