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Starving the Beast? Intra-Generational Conflict and Balanced Budget Rules

A balanced budget requirement does not only prevent fiscal policy makers from smoothing tax distortions but also affects their preferred choice of government spending. The paper analyzes the conditions under which groups opposed to government spending might want to implement a balanced budget requirement in order to induce the government to spend less. It shows that relaxing a balanced budget requirement need not be associated with higher government spending.

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Paper provided by Swiss National Bank, Study Center Gerzensee in its series Working Papers with number 05.04.

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Length: 17 pages
Date of creation: Oct 2005
Date of revision:
Handle: RePEc:szg:worpap:0504
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  1. Alberto Alesina & Roberto Perotti, 1995. "The Political Economy of Budget Deficits," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 1-31, March.
  2. Niepelt, Dirk, 2002. "Tax Smoothing versus Tax Shifting," Seminar Papers 711, Stockholm University, Institute for International Economic Studies.
  3. Persson, Torsten & Tabellini , Guido, 1997. "Political Economics and Macroeconomic Policy," Seminar Papers 630, Stockholm University, Institute for International Economic Studies.
  4. Blinder, Alan S & Holtz-Eakin, Douglas, 1984. "Public Opinion and the Balanced Budget," American Economic Review, American Economic Association, vol. 74(2), pages 144-49, May.
  5. Alberto Alesina & Roberto Perotti, 1994. "The Political Economy of Budget Deficits," NBER Working Papers 4637, National Bureau of Economic Research, Inc.
  6. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-88, December.
  7. Robert A. J. Dur & Ben D. Peletier & Otto H. Swank, 1999. "Voting on the Budget Deficit: Comment," American Economic Review, American Economic Association, vol. 89(5), pages 1377-1381, December.
  8. Alberto Alesina & Roberto Perotti, 1996. "Budget Deficits and Budget Institutions," IMF Working Papers 96/52, International Monetary Fund.
  9. Olivier J. Blanchard, 1984. "Debt, Deficits and Finite Horizons," NBER Working Papers 1389, National Bureau of Economic Research, Inc.
  10. Henning Bohn & Robert P. Inman, 1996. "Balanced Budget Rules and Public Deficits: Evidence from the U.S. States," NBER Working Papers 5533, National Bureau of Economic Research, Inc.
  11. Guido Tabellini & Alberto Alesina, 1988. "Voting on the Budget Deficit," UCLA Economics Working Papers 539, UCLA Department of Economics.
  12. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1991. "Generational Accounts - A Meaningful Alternative to Deficit Accounting," NBER Working Papers 3589, National Bureau of Economic Research, Inc.
  13. Lucas, Robert Jr. & Stokey, Nancy L., 1983. "Optimal fiscal and monetary policy in an economy without capital," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 55-93.
  14. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1996. "Are consumption taxes really better than income taxes?," Journal of Monetary Economics, Elsevier, vol. 37(3), pages 475-503, June.
  15. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
  16. J. E. Stiglitz, 1999. "Introduction," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 28(3), pages 249-254, November.
  17. V. V. Chari & Harold L. Cole, 1993. "Why are representative democracies fiscally irresponsible?," Staff Report 163, Federal Reserve Bank of Minneapolis.
  18. de Figueiredo, Rui Jr., 2003. "Budget institutions and political insulation: why states adopt the item veto," Journal of Public Economics, Elsevier, vol. 87(12), pages 2677-2701, December.
  19. James M. Poterba, 1993. "State Responses to Fiscal Crisis: The Effects of Budgetary Institutionsand Politics," NBER Working Papers 4375, National Bureau of Economic Research, Inc.
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