The Common Pool Problem of Intergovernmental Interactions and Fiscal Discipline: A Stackelberg Approach

Giovanna Bimonte () and Pietro Spennati ()
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Giovanna Bimonte: University of Salerno, Department of Economics and Statistics
Pietro Spennati: Ministry of Economics and Finance, Department of General State Account

A chapter in Mathematical and Statistical Methods for Actuarial Sciences and Finance, 2014, pp 31-34 from Springer

Abstract: Abstract In common pool models fiscal outcomes are determined by the decision-making rule that is used to aggregate conflicting interests into a single budget and they can affect spending bias. This paper analyses a model in which the minister of finance internalizes the common pool budget’s externality. From an institutional point of view, this assumption is realistic because he takes in account the budget equilibrium. Formally, this is reflected in the assumption that the minister of finance maximizes à la Stackelberg his utility function. In Stackelberg equilibrium, leader’s expenditure choice is grater than in Cournot-Nash result, while the deficit bias is lower due to agenda setting power over spending ministers.

Keywords: Common pool; Deficit bias; Cournot-Nash; Stackelberg (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-319-05014-0_7

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DOI: 10.1007/978-3-319-05014-0_7

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