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Devouring the Leviathan: fiscal policy and public expenditure in Colombia

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  • Estrada, Fernando

Abstract

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.

Suggested Citation

  • Estrada, Fernando, 2010. "Devouring the Leviathan: fiscal policy and public expenditure in Colombia," MPRA Paper 21981, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:21981
    as

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    File URL: https://mpra.ub.uni-muenchen.de/21981/1/MPRA_paper_21981.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. 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, September.
    3. Hayek, F. A., 1981. "Law, Legislation and Liberty, Volume 3," University of Chicago Press Economics Books, University of Chicago Press, edition 0, number 9780226320908.
    4. Jorge Iván González & Arcenio Pecha, 1995. "La dinámica en economía. Los enfoques de Hicks y Samuelson," REVISTA CUADERNOS DE ECONOMÍA, UN - RCE - CID, December.
    5. Homero Cuevas, 1998. "Proceso político y bienestar social," Books, Universidad Externado de Colombia, Facultad de Economía, edition 1, volume 1, number 39, EJSER Sep.
    6. 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.
    7. Curvale, Carolina & Przeworski, Adam, 2007. "Instituciones políticas y desarrollo económico en las Américas: el largo plazo," Libros y Documentos Institucionales, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 2819.
    8. Sen, Amartya Kumar, 1970. "The Impossibility of a Paretian Liberal," Scholarly Articles 3612779, Harvard University Department of Economics.
    9. 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.
    10. Sen, Amartya, 1970. "The Impossibility of a Paretian Liberal," Journal of Political Economy, University of Chicago Press, vol. 78(1), pages 152-157, Jan.-Feb..
    11. repec:hrv:faseco:34729976 is not listed on IDEAS
    12. 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 116-138.
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    Citations

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    Cited by:

    1. Mutascu, Mihai & Tiwari, Aviral & Estrada, Fernando, 2011. "Taxation and political stability," MPRA Paper 36855, University Library of Munich, Germany, revised Feb 2012.
    2. Estrada, Fernando & Mutascu, Mihai & Tiwari, Aviral, 2011. "Estabilidad política y tributación
      [Taxation and political stability]
      ," MPRA Paper 32414, University Library of Munich, Germany.
    3. Estrada, Fernando, 2013. "Estabilidad política y poder fiscal
      [political stability and tax power]
      ," MPRA Paper 58458, University Library of Munich, Germany, revised 2014.

    More about this item

    Keywords

    Colombia; procyclical economy; tax power; redistributive justice; state controls;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • A1 - General Economics and Teaching - - General Economics
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • A10 - General Economics and Teaching - - General Economics - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • N46 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Latin America; Caribbean

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