Engineering crises: Favoritism and strategic fiscal indiscipline

Gilles Saint-Paul, Davide Ticchi () and Andrea Vindigni
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Andrea Vindigni: UniGe - Università degli studi di Genova = University of Genoa

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Abstract: We develop a political economy theory of the endogenous emergence of fiscal crises based on the idea that the adjustment mechanism to a crisis favors some social groups, that may be induced ex-ante to vote for fiscal policies that are more likely to lead to a crisis. Greater levels of favoritism lead to a higher public debt and more frequent crises, as well as to higher public expenditure, if the favored group is large enough. We provide conditions under which the favored group strategically favors a weaker state's fiscal capacity and when constitutional limits on debt raise the utility of all poor.

Keywords: Entitlements; Favoritism; Fiscal capacity; Fiscal crises; Populism; Public debt (search for similar items in EconPapers)
Date: 2021-11
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Published in Economics and Politics, 2021, 33 (3), pp.583-610. ⟨10.1111/ecpo.12175⟩

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Related works:
Journal Article: Engineering crises: Favoritism and strategic fiscal indiscipline (2021)
Working Paper: Engineering crises: Favoritism and strategic fiscal indiscipline (2021)
Working Paper: Engineering Crises: Favoritism and Strategic Fiscal Indiscipline (2017)
Working Paper: Engineering Crises: Favoritism and Strategic Fiscal Indiscipline (2017)
Working Paper: Engineering Crises: Favoritism and Strategic Fiscal Indiscipline (2017)
Working Paper: Engineering Crises: Favoritism and Strategic Fiscal Indiscipline (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-03324854

DOI: 10.1111/ecpo.12175

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