The dynamics of public investment under persistent electoral advantage

Marina Azzimonti

No 11-23, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: This paper studies the effects of asymmetries in re-election probabilities across parties on public policy and its subsequent propagation to the economy. The struggle between opposing groups ? that disagree on the composition of public consumption ? results in governments being endogenously short-sighted: Systematic under investment in infrastructure and overspending on public goods arise, as resources are more valuable when in power. Because the party enjoying an electoral advantage is relatively less short-sighted, it devotes a larger proportion of government revenues to productive public investment. Political turnover, together with asymmetric policy choices, induces economic fluctuations in an otherwise deterministic environment. The author characterizes the long-run distribution of capital and shows that output increases on average with political advantage, despite the fact that the size of the government expands as a percentage of GDP. Volatility, on the other hand, is non-monotonic in political power and is an additional source of inefficiency.

Keywords: Political science; Expenditures, Public (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The dynamics of public investment under persistent electoral advantage (2015)
Working Paper: The dynamics of public investment under persistent electoral advantage (2013)
Working Paper: The dynamics of public investment under persistent electoral advantag (2012)
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