Research Repository

The Political Color of Fiscal Responsibility

Mueller, A and Storesletten, K and Zilibotti, F (2016) 'The Political Color of Fiscal Responsibility.' Journal of the European Economic Association, 14 (1). 252 - 302. ISSN 1542-4766

[img]
Preview
Text
MSZ_April2015.pdf - Accepted Version

Download (500kB) | Preview

Abstract

We propose a dynamic general equilibrium model that yields testable implications about the fiscal policy run by governments of different political color. Successive generations of voters choose taxation, expenditure, and government debt through repeated elections. Voters are heterogeneous by age and by the intensity of their preferences for public good provision. The political equilibrium switches stochastically between left- (pro-public goods) and right-leaning (pro-private consumption) governments. A shift to the left (right) is associated with a fall (increase) in government debt, an increase (fall) in taxation, and an increase (fall) in government expenditures. However, left-leaning governments engage in more debt accumulation during recessions. These predictions are shown to be consistent with the time-series evidence for the United States in the postwar period, and also with the evidence for a panel of OECD countries.

Item Type: Article
Subjects: J Political Science > JA Political science (General)
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Elements
Date Deposited: 10 Nov 2017 08:27
Last Modified: 01 Feb 2018 02:00
URI: http://repository.essex.ac.uk/id/eprint/20566

Actions (login required)

View Item View Item