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Politicians as experts, electoral control, and fiscal restraints

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  • Dulleck, Uwe
  • Wigger, Berthold U.

Abstract

We propose an argument for fiscal restraints that is based on the premise that the services of politicians are credence goods. Politicians are experts who specialize in observing the true state of the economy. Budget maximizing politicians are better informed than the electorate about the level of public spending necessary to manage public affairs. Voters, who are able to observe the size of the budget but not the necessary level of spending, affect the government's spending behavior via electoral control. A fiscal restraint limits the maximum spending a government can choose. We identify conditions under which such a fiscal restraint improves voter welfare and discuss the role of the political opposition as a second expert in situations in which the state of the economy requires a level of spending which exceeds the fiscal restraint.

Suggested Citation

  • Dulleck, Uwe & Wigger, Berthold U., 2015. "Politicians as experts, electoral control, and fiscal restraints," Journal of Public Economics, Elsevier, vol. 121(C), pages 106-116.
    • Handle: RePEc:eee:pubeco:v:121:y:2015:i:c:p:106-116
    DOI: 10.1016/j.jpubeco.2014.11.010
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    Cited by:

    1. Helmut Bester & Matthias Dahm, 2018. "Credence Goods, Costly Diagnosis and Subjective Evaluation," Economic Journal, Royal Economic Society, vol. 128(611), pages 1367-1394, June.
    2. Chen, Yongmin & Li, Jianpei & Zhang, Jin, 2017. "Liability in Markets for Credence Goods," MPRA Paper 80206, University Library of Munich, Germany.
    3. Christofzik, Désirée I. & Kessing, Sebastian G., 2018. "Does fiscal oversight matter?," Journal of Urban Economics, Elsevier, vol. 105(C), pages 70-87.
    4. Balafoutas, Loukas & Kerschbamer, Rudolf, 2020. "Credence goods in the literature: What the past fifteen years have taught us about fraud, incentives, and the role of institutions," Journal of Behavioral and Experimental Finance, Elsevier, vol. 26(C).
    5. Gerhard Schulz & Philipp Jäger & Torsten Schmidt & Erik Gawel & Thomas Puls & Gernot Sieg & Berthold U. Wigger & Alexander Eisenkop, 2018. "Für eine zukunftsfähige und solide finanzierte Verkehrsinfrastruktur – welche Reformen sind erforderlich?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 71(22), pages 03-22, November.
    6. Carolina Guerini & Donato Masciandaro, 2023. "Financial Education between Market and State: Private Commitment, Conflicts of Interest and Public Certification," BAFFI CAREFIN Working Papers 23213, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    7. Li, Jianpei & Ouyang, Yaofu, 2016. "Expert Costs and the Role of Verifiability," MPRA Paper 74390, University Library of Munich, Germany.
    8. Sieg Gernot & Wigger Berthold U., 2017. "ÖPP – Eine vorteilhafte Beschaffungsvariante für die künftige Infrastrukturgesellschaft," Zeitschrift für Wirtschaftspolitik, De Gruyter, vol. 66(3), pages 239-245, December.
    9. Benjamin Bittschi & Berthold U. Wigger, 2019. "On the Political Feasibility of Increasing the Legal Retirement Age," CESifo Working Paper Series 7492, CESifo.
    10. Khani Hoolari, Seyed Morteza & Taghinejad Omran, Vahid, 2017. "Natural Budget Deficit and Natural Political Cyclicality," MPRA Paper 78107, University Library of Munich, Germany.

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    More about this item

    Keywords

    Electoral control; Fiscal restraints; Credence goods;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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