This paper investigates the impact of public expenditures and taxation on economic growth using panel data for a sample of OECD countries. The empirical results suggest that fiscal policy influences growth through three main channels. First, the government contributes directly to factor...

Because of their more limited inequality and more comprehensive social welfare systems, many perceive average welfare to be higher in Scandinavian societies than in the United States. Why then does the United States not adopt Scandinavian-style institutions? More generally, in an interdependent...

This Paper uses a large new panel data set to examine the relationship between elections and fiscal policy. We find clear evidence of political business cycles in macroeconomic policy: spending increases before elections while revenues fall, leading to a larger deficit in election years. We also...

International surveys reveal wide differences between the views held in different countries concerning the causes of wealth or poverty and the extent to which people are responsible for their own fate. At the same time, social ethnographies and experiments by psychologists demonstrate...

This paper describes the political economy of shadow banking and how it relates to the dramatic institutional changes experienced by global capitalism over past 100 years. We suggest that the dynamics of shadow banking rest on the distributive tension between workers and firms. Politics wedge...

This paper seeks to explain the significant variations in the social contract observed across nations. It shows how countries with similar technologies and preferences, as well as equally democratic political systems, can sustain very different average and marginal tax rates. Similarly, it...

This Paper provides an analytical characterization of Markov perfect equilibria in a model with repeated majority voting, where agents vote over income redistribution. The key feature of the theory is that the future constituency of redistributive policies depends positively on the current level...

The worst global downturn since the Great Depression has caused ballooning budget deficits in most nations, as tax revenues collapse and governments bail out financial institutions and attempt countercyclical fiscal policy. With notable exceptions, most economists accept the desirability of...

In this paper, we show that consumption externalities are a source of equilibrium indeterminacy in a growth model with endogenous labor supply. In particular, when the marginal rate of substitution between own consumption and the others' consumption is constant along the equilibrium path, the...

The recent literature on endogenous economic growth allows for the effects of fiscal policy on long-term growth. If the social rate of return on investment exceeds the private return, tax policies that encourage investment can raise the growth rate and levels of utility. An excess of the social...