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Ideological polarization and government debt

Author

Listed:
  • Mickael Melki

    (Paris School of Business)

  • Andrew Pickering

    (University of York)

Abstract

Models of strategic debt predict that public debt increases with polarization, measured by the ideological distance between the government and its likely successor. Conversely if voters are both short-termist and also more likely to switch their vote for parties offering higher spending and public good provision when the electorate is ideologically concentrated, then debt can fall with polarization, measured by dispersion of ideological preferences in the electorate. Using time-varying polarization measures generated from ideology data from party manifestos, we find a sizable and statistically significant negative association between debt levels in OECD countries and ideological polarization in the electorate.

Suggested Citation

  • Mickael Melki & Andrew Pickering, 2022. "Ideological polarization and government debt," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(4), pages 811-833, August.
    • Handle: RePEc:kap:itaxpf:v:29:y:2022:i:4:d:10.1007_s10797-021-09690-1
    DOI: 10.1007/s10797-021-09690-1
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    More about this item

    Keywords

    Public debt; Strategic debt; Ideological polarization;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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