NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Political Economy of Public Debt: A Laboratory Study

Marco Battaglini, Salvatore Nunnari, Thomas R. Palfrey

NBER Working Paper No. 22406
Issued in July 2016
NBER Program(s):   POL

This paper reports the results from a laboratory experiment designed to study political distortions in the accumulation of public debt. A legislature bargains over the levels of a public good and of district specific transfers in two periods. The legislature can issue or purchase risk-free bonds in the first period and the level of public debt creates a dynamic linkage across policymaking periods. In line with the theoretical predictions, we find that public policies are inefficient and efficiency is increasing in the size of the majority requirement, with higher investment in public goods and lower debt associated with larger majority requirements. Also in line with the theory, we find that debt is lower when the probability of a negative shock to the economy in the second period is higher, evidence that debt is used to smooth consumption.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22406

Published: Marco Battaglini, 2011. "The Political Economy of Public Debt," Annual Review of Economics, vol 3(1), pages 161-189.

Users who downloaded this paper also downloaded* these:
Ball w22410 The Fed and Lehman Brothers: Introduction and Summary
Alesina and Passalacqua w21821 The Political Economy of Government Debt
Cochrane w22485 Macro-Finance
Keen and Slemrod w22408 Optimal Tax Administration
Galiani, McEwan, and Quistorff w22468 External and Internal Validity of a Geographic Quasi-Experiment Embedded in Cluster-Randomized Experiment
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us