Public debt rule breaking by time-inconsistent voters

Ryo Arawatari and Tetsuo Ono

No 19-14, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This study considers how present-biased preferences influence public debt policy when a violation of debt rules is possible. To address this issue, the study extends the framework of Bisin, Lizzeri, and Yariv (American Economic Review 105, (2015), 1711?1737) by allowing for rule breaking with extra costs, and we show that rule breaking occurs when a country exhibits a strong present bias. We further extend the model by introducing a political process for determining the debt rule, and we show that a polarization of debt rules emerges between countries with high and low degrees of present bias.

Keywords: Debt ceilings; Present bias; Public debt. (search for similar items in EconPapers)
JEL-codes: D72 D78 H62 H63 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2019-10
New Economics Papers: this item is included in nep-cdm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://www2.econ.osaka-u.ac.jp/econ_society/dp/1914.pdf (application/pdf)

Related works:
Journal Article: Public debt rule breaking by time-inconsistent voters (2021)
Working Paper: Public debt rule breaking by time-inconsistent voters (2020)
Working Paper: Public debt rule breaking by time-inconsistent voters (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:1914

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