A Model of Endogenous Fiscal Deficits and Delayed Fiscal Reforms
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.
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, Poterba and von Hagen. 1999