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Sins of the elder: Fiscal illusion in democracies

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  • Paulo Reis Mourao,Ph.D

    (University of Minho)

Abstract

This work discusses the implications of democratic maturity on levels of Fiscal Illusion. Its main contribution is to identify the relevance of good-governance institutions that prevent incumbents in established democracies from degenerating into electoral rent-seekers. This work develops a model that converges with a Gordon (1989) type theorem. This theorem predicts that some countries ruled by incumbents are more likely to revert to FI practices as the electorate’s maturity increases and if there are no strong restrictions on the social acceptance of political rents. Our empirical results show that democratic maturity tends to diminish fiscal illusion.

Suggested Citation

  • Paulo Reis Mourao,Ph.D, 2011. "Sins of the elder: Fiscal illusion in democracies," Hacienda Pública Española / Review of Public Economics, IEF, vol. 196(1), pages 9-35, january.
    • Handle: RePEc:hpe:journl:y:2011:v:196:i:1:p:9-35
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Democratic maturity; Fiscal Illusion; rent-seeking.;
    All these keywords.

    JEL classification:

    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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