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Rotten Parents and Disciplined Children: A Politico-Economic Theory of Public Expenditure and Debt

  • Zheng Song

    (Fudan University)

  • Kjetil Storesletten
  • Fabrizio Zilibotti

We test the implications of the theory in the presence of political shocks affecting the taste for public consumption. Government debt is mean reverting and left-wing governments are predicted to accumulate less debt. Data from the US and from a panel of 21 OECD countries confirm the main predictions of the theory.

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Paper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 685.

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Date of creation: 2007
Handle: RePEc:red:sed007:685
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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