The Political Economy of Debt and Entitlements

Laurent Bouton, Alessandro Lizzeri and Nicola Persico ()
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Nicola Persico: http://www.nicolapersico.com/

Working Papers from Georgetown University, Department of Economics

Abstract: We present a political-economic model of total government obligations-debt and entitlements. In our model, both are tools by which temporarily powerful groups extract resources from groups that will be powerful: debt transfers resources across periods; entitlements directly target the future allocation of resources. We prove four results. First, debt and entitlements are strategic substitutes: constraining one increases the other. Second, it is sometimes beneficial to relax a constraint on debt, and always to limit but not eliminate entitlements. Third, debt and entitlements respond in opposite ways to political instability. Finally, polarization can cause joint growth of debt and entitlements.

Keywords: Government debt; entitlement programs; fiscal rules; political economy (search for similar items in EconPapers)
JEL-codes: D72 E62 H60 (search for similar items in EconPapers)
Date: 2018-10-19
New Economics Papers: this item is included in nep-cdm, nep-mac and nep-pol
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Related works:
Journal Article: The Political Economy of Debt and Entitlements (2020)
Working Paper: The Political Economy of Debt and Entitlements (2019)
Working Paper: The Political Economy of Debt and Entitlements (2016)
Working Paper: The Political Economy of Debt and Entitlements (2016)
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