Debts and Deficits with Fragmented Fiscal Policymaking

A. Velasco

Working Papers from C.V. Starr Center for Applied Economics, New York University

Abstract: This paper develops a political-economy model of fiscal policy - one in which government resources are a "common property" out of which interest groups can finance expenditures on their preferred items. This setup has striking macroeconomic implications. Transfers are higher than a benevolent planner would choose them to be; fiscal deficits emerge even when there are no reasons for intetemporal smoothing, and in the long run government debts tend to be excessively high; peculiar time profiles for transferscan emerge.

Keywords: FISCAL POLICY; PUBLIC GOODS; DEBT (search for similar items in EconPapers)
JEL-codes: E6 H3 H6 (search for similar items in EconPapers)
Pages: 22 pages
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:cvs:starer:98-06

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