The Political Economy of Government Debt
This paper critically reviews the literature which explains why and under which circumstances governments accumulate more debt than it would be consistent with optimal fiscal policy. We also discuss numerical rules or institutional designs which might lead to a moderation of these distortions.
We thank Marina Azzimonti, Marco Battaglini, Stephen Coate, Casey Mulligan, Per Pettersson-Lindbom, Guido Tabellini, Pierre Yared, Fabrizio Zilibotti and the editors for very useful conversations and comments on earlier drafts. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.