TY - JOUR AU - Roubini,Nouriel AU - Sachs,Jeffrey TI - Political and Economic Determinants of Budget Deficits in the IndustrialDemocracies JF - National Bureau of Economic Research Working Paper Series VL - No. 2682 PY - 1988 Y2 - August 1988 UR - http://www.nber.org/papers/w2682 L1 - http://www.nber.org/papers/w2682.pdf N1 - Author contact info: Nouriel Roubini Department of Economics, KMC 7-83 Stern School of Business, New York University 44 West 4th Street New York, NY 10012 Tel: 212/998-0886 Fax: 212/995-4218 E-Mail: nroubini@stern.nyu.edu Jeffrey D. Sachs The Earth Institute at Columbia University 314 Low Library 535 West 116th Street, MC 4327 New York, NY 10027 Tel: 212/854-8704 Fax: 212/854-8702 E-Mail: sachs@columbia.edu M2 - featured in NBER digest on 1988-12-01 AB - This paper focuses on the management of fiscal deficits and the public debt in the industrial democracies. Given the large deficits in many OECD countries in recent years, and the resulting sharp rise in the public debt, it is important to determine the economic and political forces leading to such large deficits. We find only partial support for the "equilibrium approach to fiscal policy", which assumes that tax rates are set over time in order to minimize the excess burden of taxation. Tax rates do not seem to be smoothed, and budget deficits in many countries in recent years appear to be too large to be explained by appeal to transitory increases in government spending. We suggest that in several countries the slow rate at which the post-'73 fiscal deficits were reduced resulted from the difficulties of political management in coalition governments. There is a clear tendency for larger deficits in countries characterized by a by a short average tenure of government and by the presence of many political parties in a ruling coalition. ER -