The Political Economy of the Revenue Deficit
A widely accepted hypothesis is that concessions demanded by and granted to vested interests are responsible for the steady decline in the government financial position. We argue that it was rather the supply-side shocks of the seventies combined with the political objective of protecting the poor that were responsible. We support our argument by examining time series of disaggregated government budget data, and the theory of incentives under imperfect information. The latter suggests that price controls in the presence of cost shocks would lead to systematic incentives to lower quality and investment. And therefore lower tax capacity and the ability to reduce poverty in the future. We illustrate these mechanisms at work in power, telecommunications, railways, roads, education, and tax collection. The analysis is hopeful, however, because if this causal mechanism were understood, a concerted attempt to rationalise user charges and improve quality would be more acceptable. The process would be helped by macroeconomic policies that keep interest rates low and prevent exchange rate volatility, while supply side policies keep inflation low.
|Date of creation:||1999|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
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.:
- Goyal, A., 1998.
"Transitional Exchange Rate Policy in a Low Per Capita Income Country,"
147, Indira Gandhi Institute of Development Research-.
- Ashima Goyal, 2006. "Transitional Exchange Rate Policy In A Low Per Capita Income Country," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(3), pages 37-56, August.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:29980. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.