A Model of Endogenous Fiscal Deficits and Delayed Fiscal Reforms
(954 K)
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NBER Working Paper No. 6336
Issued in December 1997
NBER Program(s): PE
This paper develops a political-economic model of fiscal policy one in which" government resources are a common property' out of which interest groups can finance" expenditures on their preferred items. This setup has striking macroeconomic implications. " First, fiscal deficits and debt accumulation occur even when there are no reasons for intertemporal smoothing. Second deficits can be eliminated through a fiscal reform, but such a reform may only take place after a" delay during which government debt is built up.
Published:
- Fiscal Institutions and Fiscal Performance. Poterba, James M., and Jurgen von Hagen, eds., Chicago: The University of Chicago Press, 1999,pp. 37-57.
,
- A Model of Endogenous Fiscal Deficits and Delayed Fiscal Reforms, Andres Velasco, in Fiscal Institutions and Fiscal Performance (1999), University of Chicago Press
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