The political economy of fiscal deficits and government production

Gisle Natvik

No 2009/07, Working Paper from Norges Bank

Abstract: This paper analyzes a framework where policymakers decide how to spend public resources on physical capital and labor in order to produce two public goods. Candidate policymakers disagree about which goods to produce, and may alternate in office due to elections. When capital and labor are complementary inputs to the production of public goods, the anticipation of political turnover reduces public savings in physical capital rather than finnancial assets. Political turnover renders the stock of physical capital for public production too low and ine¢ ciently combined with labor.

Keywords: Political economics; budget deficits; public investment (search for similar items in EconPapers)
JEL-codes: E6 H4 H54 H6 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2009-03-30
New Economics Papers: this item is included in nep-mac, nep-pbe and nep-pol
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Citations: View citations in EconPapers (8)

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Journal Article: The political economy of fiscal deficits and government production (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2009_07

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