The Political Economy of Fiscal Policy: An Experimental Study on the Strategic Use of Deficits

Matthias Sutter

Public Choice, 2003, vol. 116, issue 3-4, 313-32

Abstract: Field data on the strategic use of deficits to limit the budgetary scope of future governments are inconclusive about the effects of political polarization or a government's re-election probability on fiscal policy. Therefore, we designed a controlled experiment to examine the strategic use of deficits. Using a within-subjects design, we find that deficits rise with a higher degree of polarization and a lower reelection probability. However, in a between-subjects design neither polarization nor reelection probabilities have a systematic effect. We discuss the implications of our experimental results for empirical tests of the strategic use of deficits with field data. Copyright 2003 by Kluwer Academic Publishers

Date: 2003
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