Growth, Unemployment, and Fiscal Policy: A Political Economy Analysis

Tetsuo Ono

No 14-30, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This study presents an overlapping-generations model featuring endogenous growth, collective wage-bargaining, and probabilistic voting over fiscal policy. We charac- terize a Markov-perfect political equilibrium of the voting game within and across generations and show the following results. First, greater bargaining power of unions lowers the growth rate of capital and creates a positive correlation between unem- ployment and government debt. Second, greater political power of the old lowers the growth rate and shifts government expenditure from the unemployed to the old. Third, a balanced budget requirement increases the growth rate but may benefit the old at the expense of the unemployed.

Keywords: Economic Growth; Fiscal Policy; Government Debt; Unemployment; Voting (search for similar items in EconPapers)
JEL-codes: E24 E62 H60 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2014-08
New Economics Papers: this item is included in nep-cdm, nep-dge, nep-fdg, nep-gro, nep-mac, nep-pbe and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: GROWTH, UNEMPLOYMENT, AND FISCAL POLICY: A POLITICAL ECONOMY ANALYSIS (2019)
Working Paper: Growth, Unemployment, and Fiscal Policy: A Political Economy Analysis (2017)
Working Paper: Growth, Unemployment, and Fiscal Policy: A Political Economy Analysis (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:1430

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