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Majoritarian Delays


  • Julio, Paulo


This paper illustrates how delayed debt stabilizations can arise in a society without any emerging conflict of interests among its members. We argue that, under a majority voting rule, the economy may generate excessive levels of government spending and larger debts over time,and that this delay is increasing in income inequality. The intuitionfor this result is simple: a majority of citizens may and in delaying stabilizations a way to increase government expenditures, transferring in this way resources from the richest to the poorest citizens in the economy. This process may explain the upward trend and the diffculty to reduce public expenditures, the so called ratchet effect.

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  • Julio, Paulo, 2007. "Majoritarian Delays," FEUNL Working Paper Series wp513, Universidade Nova de Lisboa, Faculdade de Economia.
  • Handle: RePEc:unl:unlfep:wp513

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    References listed on IDEAS

    1. Gervais, Simon & Odean, Terrance, 2001. "Learning to be Overconfident," Review of Financial Studies, Society for Financial Studies, vol. 14(1), pages 1-27.
    2. Luís Santos-Pinto & Joel Sobel, 2005. "A Model of Positive Self-Image in Subjective Assessments," American Economic Review, American Economic Association, vol. 95(5), pages 1386-1402, December.
    3. Basu, Sudipta & Markov, Stanimir, 2004. "Loss function assumptions in rational expectations tests on financial analysts' earnings forecasts," Journal of Accounting and Economics, Elsevier, vol. 38(1), pages 171-203, December.
    4. Chen, Zhaohui & Giovannini, Alberto, 1992. "Target zones and the distribution of exchange rates: An estimation method," Economics Letters, Elsevier, vol. 40(1), pages 83-89, September.
    5. Isaac, R Mark & James, Duncan, 2000. "Just Who Are You Calling Risk Averse?," Journal of Risk and Uncertainty, Springer, vol. 20(2), pages 177-187, March.
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