Rent seeing distortions and fiscal procyclicality

Ethan Ilzetzki ()

MPRA Paper from University Library of Munich, Germany

Abstract: Recent research has demonstrated that while government expenditures are countercyclical in most industrialized countries, they tend to be procyclical in developing countries. We develop a dynamic political-economy model to explain this phenomenon. Simulations of the model allow us to quantitatively compare the relative role of common explanations for fiscal procyclicality. We conclude that rent seeking within the fiscal process can explain fiscal procyclicality better than other common explanations, such as borrowing constraints and macroeconomic volatility.

JEL-codes: E62 D72 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2006-04-30
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