A Common Pool Theory of Deficit Bias Correction

Charles Wyplosz and Signe Krogstrup

No 5866, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The budget deficit bias is modeled as the result of a domestic common pool problem and of an international externality. Along with Piguvian taxes, a number of policy measures are examined and welfare-ranked: deficit ceilings, golden rules and delegation. In general, the combination of delegation and an optimally-set deficit ceiling deliver the social optimum, even if the deficit ceiling is not credible.

Keywords: Common pool; Fiscal restraints; Fiscal rules; Stability pact; Fiscal institutions; Deficit bias (search for similar items in EconPapers)
JEL-codes: E61 E62 H6 (search for similar items in EconPapers)
Date: 2006-10
New Economics Papers: this item is included in nep-cba, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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