Ideological polarization and government debt

Mickael Melki and Andrew Pickering
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Mickael Melki: Paris School of Business

International Tax and Public Finance, 2022, vol. 29, issue 4, No 1, 833 pages

Abstract: Abstract Models of strategic debt predict that public debt increases with polarization, measured by the ideological distance between the government and its likely successor. Conversely if voters are both short-termist and also more likely to switch their vote for parties offering higher spending and public good provision when the electorate is ideologically concentrated, then debt can fall with polarization, measured by dispersion of ideological preferences in the electorate. Using time-varying polarization measures generated from ideology data from party manifestos, we find a sizable and statistically significant negative association between debt levels in OECD countries and ideological polarization in the electorate.

Keywords: Public debt; Strategic debt; Ideological polarization (search for similar items in EconPapers)
JEL-codes: H63 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10797-021-09690-1

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