The political economy of fiscal deficits and government production
Gisle Natvik
European Economic Review, 2013, vol. 58, issue C, 81-94
Abstract:
This paper studies how disagreement over which goods government should provide affects resource allocation in the public sector. An incumbent combines pre-determined capital with labor to produce different goods in the current period, and accumulates physical and financial capital for future production. Capital-labor complementarity determines how anticipated political turnover shapes governments' choice between saving in physical capital or financial assets. Turnover tends to render the stock of physical capital for public production too low and inefficiently combined with labor. The main cost of political turnover is production inefficiency in the public sector, not a suboptimal savings level.
Keywords: Political economics; Budget deficits; Public investment (search for similar items in EconPapers)
JEL-codes: E6 H4 H54 H6 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292112001560
Full text for ScienceDirect subscribers only
Related works:
Working Paper: The political economy of fiscal deficits and government production (2009) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:58:y:2013:i:c:p:81-94
DOI: 10.1016/j.euroecorev.2012.12.001
Access Statistics for this article
European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer
More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().