Towards Micropolitical Foundations of Public Finance

Torsten Persson (), Gérard Roland and Guido Tabellini

No 119, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: Observed fiscal policy reflects the incentives embedded in political institutions. In this paper, we illustrate the effects of two general institutional features: separation of powers, which is common in Presidential-Congressional political systems, and legislative cohesion, which is typical of parliamentary systems. Compared to a simple legislative game, separation of powers brings about a smaller size of government and lower waste, whereas legislative cohesion induces a more equal distribution, but more waste and higher taxes.

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Journal Article: Towards micropolitical foundations of public finance (1998)
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