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Lobbying, the Composition of Government Expenditures, and the Politics of Fiscal Policy

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  • Chetan Ghate

Abstract

This paper constructs a one sector growth model to examine the impact of political lobbying on the formation of fiscal policy. The model predicts that lobbying can induce endogenous regime switches, development traps, and a sub‐optimal allocation of government expenditures between productive and unproductive ends, leading to long run income losses in the economy. A calibrated version of the model is used to generate estimates of the dynamic social costs of lobbying by estimating the optimal savings rates necessary to induce balanced growth in the economy. Finally, the model predicts that lobbying may influence the growth of government.

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  • Chetan Ghate, 2001. "Lobbying, the Composition of Government Expenditures, and the Politics of Fiscal Policy," Australian Economic Papers, Wiley Blackwell, vol. 40(2), pages 133-145, June.
    • Handle: RePEc:bla:ausecp:v:40:y:2001:i:2:p:133-145
    DOI: 10.1111/1467-8454.00117
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    Cited by:

    1. López, Ramón & Islam, Asif, 2011. "Fiscal spending for economic growth in the presence of imperfect markets," CEPR Discussion Papers 8709, C.E.P.R. Discussion Papers.
    2. Ghate Chetan, 2003. "The Politics of Endogenous Growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-18, August.
    3. FIC Tatiana & GHATE Chetan, 2010. "Economic Growth and the Welfare State: A Model of Breaks and Starts," EcoMod2003 330700054, EcoMod.

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