American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Public Debt and the Political Economy of Reforms
American Economic Journal: Microeconomics
vol. 16,
no. 3, August 2024
(pp. 459–91)
Abstract
How do electoral incentives influence the choice to experiment with a policy reform that generates uncertain future benefits? To answer this question, we examine a two-period model of redistributive politics with uncertain policy outcomes involving a mixture of private and public benefits. In equilibrium, we find that the intertemporal trade-off between current policy costs and future benefits creates an incentive for politicians to use public debt to smooth spending across periods. The higher the share of policy benefits that are in the form of a public good, the higher the level of available debt-related spending on targeted policies that is necessary.Citation
Boyer, Pierre C., Brian Roberson, and Christoph Esslinger. 2024. "Public Debt and the Political Economy of Reforms." American Economic Journal: Microeconomics, 16 (3): 459–91. DOI: 10.1257/mic.20220238Additional Materials
JEL Classification
- D63 Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- E23 Macroeconomics: Production
- H41 Public Goods
- H63 National Debt; Debt Management; Sovereign Debt
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