Political frictions and public policy outcomes

Daryna Grechyna

Journal of Comparative Economics, 2016, vol. 44, issue 3, 484-495

Abstract: We study the role of political frictions in public policy outcomes. We propose a simple model of fiscal policy that combines a lack of commitment by the government, political turnover, and another political friction that can be interpreted either as political polarization or as public rent-seeking. We show that political turnover increases public debt levels, while political polarization or public rent-seeking leads to higher public spending. We evaluate the importance of different political frictions for fiscal policy outcomes using a sample of twenty developed countries. We find that the data on political instability combined with the data on public rent-seeking explain 25% of the variation in public debt levels.

Keywords: Fiscal policy; Political turnover; Political polarization; Public rent-seeking (search for similar items in EconPapers)
JEL-codes: E62 H11 K42 P26 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:44:y:2016:i:3:p:484-495

DOI: 10.1016/j.jce.2016.06.001

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