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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
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    References listed on IDEAS

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    Cited by:

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

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    More about this item

    Keywords

    Colombia; procyclical economy; tax power; redistributive justice; state controls;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • 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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