Four Budget Deficit Theories in One Model

Jens Peter Siebel and Athanassios Pitsoulis

Journal for Economic Educators, 2011, vol. 11, issue 1, 25-32

Abstract: The analysis of many budget deficit theories is too demanding for undergraduate students. This paper illustrates governments' incentives to create budget deficits by means of a simple graphical model. It integrates four budget deficit theories: The theory of the state as Leviathan, two different strategic deficit theories, and the theory of tax competition. These theories are embedded into an illustrative example of political competition between a conservative party and a liberal party. The main pedagogical benefits of the model are its intuitive setup and its waiver of demanding analysis.

Keywords: budget deficit; public debt; teaching; macroeconomics instruction (search for similar items in EconPapers)
JEL-codes: H11 H63 H71 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:mts:jrnlee:v:11:y:2011:i:1:p:25-32

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