The Political Economy of Budget Deficits

August 1, 1994

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Alberto Alesina, and Roberto Perotti. The Political Economy of Budget Deficits, (USA: International Monetary Fund, 1994) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper provides a critical survey of the literature on politico-institutional determinants of the government budget. We organize our discussion around two questions: Why did certain OECD countries, but not others, accumulate large public debts? Why did these fiscal imbalances appear in the last 20 years rather than before? We begin by discussing the “tax smoothing” model and conclude that this approach alone cannot provide complete answers to these questions. We will then proceed to a discussion of political economy models, which we organize in six groups: (i) models based upon opportunistic policymakers and naive voters with “fiscal illusion;” (ii) models of intergenerational redistributions; (iii) models of debt as a strategic variable, linking the current government with the next one; (iv) models of coalition governments; (v) models of geographically dispersed interests; and (vi) models emphasizing the effects of budgetary institutions. We conclude by briefly discussing policy implications.

Subject: Budget planning and preparation, Expenditure, Fiscal policy, Government debt management, Public debt, Public financial management (PFM)

Keywords: Budget planning and preparation, Coalition government, Country, Debt, Eastern Europe, Europe, Global, GNP ratio, Government, Government change, Government debt management, Government durability, Government fragility, Government fragmentation, Government negotiations, Party government, Period government, Policy implication, Right wing government, Veto power, WP

Publication Details

Pages:

48
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1994/085
Stock No:

WPIEA0851994
ISBN:

9781451850680
ISSN:

1018-5941

Notes

Also published in Staff Papers, Vol. 42, No. 1, March 1995.

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