A Positive Theory of Fiscal Deficits and Government Debt

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A Positive Theory of Fiscal Deficits and Government Debt

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Title: A Positive Theory of Fiscal Deficits and Government Debt
Author: Tabellini, Guido; Alesina, Alberto

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Citation: Alesina, Alberto, and Guido Tabellini. 1990. A positive theory of fiscal deficits and government debt. Review of Economic Studies 57, no. 3: 403-414.
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Abstract: This paper considers an economy in which policymakers with different preferences alternate in office as a result of elections. Government debt is used strategically by each policymaker to influence the choices of his successors. If different policymakers disagree about the desired composition of government spending between two public goods, the economy exhibits a deficits bias; that is, debt accumulation is higher than it would be with a social planner. The equilibrium level of debt is larger the larger is the degree of polarization between alternating governments and the less likely it is that the current government will be re-elected.
Published Version: http://dx.doi.org/10.2307/2298021
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:3612769
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