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Quantifying the Impact of Political Frictions on Public Policy

Daryna Grechyna ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper evaluates the impact of political frictions on fiscal policy in a sample of developed countries. We use a model of fiscal policy that features a lack of commitment by the government, political turnover, and another political friction which can be interpreted either as political polarization or as public rent-seeking. Political turnover increases public debt levels, while political polarization or public rent-seeking lead to higher public spending. We find that political frictions account for 67% of variation in government debt, 36% of variation in government spending, and 24% of variation in taxes in twenty two developed countries.

Keywords: fiscal policy; political turnover; political polarization; public rent-seeking. (search for similar items in EconPapers)
JEL-codes: E61 E62 H21 H63 (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-mac, nep-pbe and nep-pol
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