Why is Fiscal Policy Often Procyclical?

Alberto Alesina () and Guido Tabellini ()

No 11600, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Many countries, especially developing ones, follow procyclical fiscal polices, namely spending goes up (taxes go down) in booms and spending goes down (taxes go up) in recessions. We provide an explanation for this suboptimal fiscal policy based upon political distortions and incentives for less-than-benevolent government to appropriate rents. Voters have incentives similar to the %u201Cstarving the Leviathan%u201D classic argument, and demand more public goods or fewer taxes to prevent governments from appropriating rents when the economy is doing well. We test this argument against more traditional explanations based purely on borrowing constraints, with a reasonable amount of success.

New Economics Papers: this item is included in nep-mac, nep-pbe and nep-pol
Date: Written 2005-09
Note: EFG PE POL
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Related works:
Working Paper: Why is fiscal policy often procyclical? (2005)
Working Paper: Why Is Fiscal Policy Often Procyclical?
Working Paper: Why is Fiscal Policy often Procyclical? (2005)
Working Paper: Why is fiscal policy often procyclical? (2005)
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