Budget deficits and redistributive politics

Alessandro Lizzeri

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    Abstract

    This paper proposes a new view of the forces in the political process that cause governments to accumulate debt. The analysis builds on a model of redistributive politics that, contrary to median voter models, does not restrict the set of policies that politicians can propose. I show that deficits occur even in an environment where voters (and periods) are homogeneous. This is an environment where previous political theories of debt would predict budget balance. In the model deficits are a way for candidates to better target promises to voters and are therefore used as tools of redistributive politics. The main contribution of the analysis is to show that the same forces that push candidates to redistribute resources across voters to pursue political advantage are forces that generate budget deficits.

    Original languageEnglish (US)
    Pages (from-to)909-928
    Number of pages20
    JournalReview of Economic Studies
    Volume66
    Issue number4
    DOIs
    StatePublished - Oct 1999

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    ASJC Scopus subject areas

    • Economics and Econometrics

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