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Budget deficit, size of the public sector and majority voting

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  • Jens Peter Siebel

Abstract

In this paper Tabellini’s and Alesina’s (1990) median voter model for the explanation of budget deficits is modified by endogenizing the private sector. Debt finance is supplemented by taxing a private consumption which serves as an additional source of revenue for funding the public sector. The introduction of the private sector enables us to explain the budget balance as a result of political polarization with a left-wing party and a right-wing party having different preferences for the size of the public sector.

Suggested Citation

  • Jens Peter Siebel, 2005. "Budget deficit, size of the public sector and majority voting," Volkswirtschaftliche Diskussionsbeiträge 120-05, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
    • Handle: RePEc:sie:siegen:120-05
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    File URL: http://www.wiwi.uni-siegen.de/vwl/repec/sie/papers/120-05.pdf
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    References listed on IDEAS

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    1. Torsten Persson & Lars E. O. Svensson, 1989. "Why a Stubborn Conservative would Run a Deficit: Policy with Time-Inconsistent Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 325-345.
    2. Wagschal Uwe, 1998. "Politische und Institutionelle Determinanten der Staatsverschuldung," Zeitschrift für Wirtschaftspolitik, De Gruyter, vol. 47(2), pages 220-248, August.
    3. Persson, Torsten & Tabellini, Guido, 1999. "The size and scope of government:: Comparative politics with rational politicians," European Economic Review, Elsevier, vol. 43(4-6), pages 699-735, April.
    4. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-971, October.
    5. David Martimort, 2001. "Optimal Taxation and Strategic Budget Deficit Under Political Regime Switching," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(3), pages 573-592.
    6. Alberto Alesina & Roberto Perotti, 1995. "The Political Economy of Budget Deficits," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 1-31, March.
    7. Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," American Economic Review, American Economic Association, vol. 80(1), pages 37-49, March.
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    More about this item

    Keywords

    budget deficit; public debt; median voter;
    All these keywords.

    JEL classification:

    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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