TY  - JOUR
AU  - Alesina,Alberto
AU  - Tabellini,Guido
TI  - Why is Fiscal Policy Often Procyclical?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11600
PY  - 2005
Y2  - September 2005
UR  - http://www.nber.org/papers/w11600
L1  - http://www.nber.org/papers/w11600.pdf
N1  - Author contact info:
Alberto F. Alesina
Department of Economics
Harvard University
Littauer Center 210
Cambridge, MA 02138
Tel: 617/495-8388
Fax: 617/495-7730
E-Mail: aalesina@harvard.edu

Guido Tabellini
IGIER Universita' Bocconi
Via Roentgen 1
20136 Milano
Italy
Tel: 39 2 583 6 3305; fax 3302
E-Mail: guido.tabellini@unibocconi.it
M2  - featured in NBER digest on 2005-09-19
AB  - Many countries, especially developing ones, follow procyclical fiscal polices, namely spending goes up (taxes go down) in booms and spending goes down (taxes go up) in recessions. We provide an explanation for this suboptimal fiscal policy based upon political distortions and incentives for less-than-benevolent government to appropriate rents.  Voters have incentives similar to the %u201Cstarving the Leviathan%u201D classic argument, and demand more public goods or fewer taxes to prevent
governments from appropriating rents when the economy is doing well.  We test this argument against more traditional explanations based purely on borrowing constraints, with a reasonable amount of success.
ER  -