Uncertainty about the future preferences of the government may induce policy makers to run excessive budget deficits. As a solution to this problem, economists have proposed to impose a binding debt rule. In this paper we argue that a binding debt rule does not eliminate the distortions due to...

We consider models where the Ramsey-optimal fiscal policy under Full Commitment (FC) is time-inconsistent and define a new notion of optimal policy, Limited-Time Commitment (LTC). Successive one-period lived governments can commit to future plans over a finite horizon. We provide a sufficient...

We analyze the political economy of monetary unification among countries with different quality of institutions. Countries with stronger institutions have lower public spending and better investment incentives, even under a stronger currency. Governments under weaker institutions spend more so...

In this paper we investigate experimentally the functioning of a wage tax financed unemployment benefit system on the development of the budget deficit, unemployment, and some other indicators of economic performance in an international economy. We find support for the hypothesis that...

We analyse the poisonous interaction between bank rescues, financial fragility and sovereign debt discounts. In our model balance sheet constrained financial intermediaries finance both capital expenditure of intermediate goods producers and government deficits. The financial intermediaries face...

We investigate the effectiveness of "Keynesian" fiscal stimuli when government deficits and debt rollovers are (possibly partially) financed by balance sheet constrained financial intermediaries. Because financial intermediaries operate under a leverage constraint, deficit financing of fiscal...

A review is given of the use of laboratory experiments in the Public Choice literature. A distinction is made in experiments on public goods, participation games, rent-seeking and lobbying, and spatial voting.

This paper explores the determinants of deviations of ex-post budget outcomes from first-release outcomes published towards the end of the year of budget implementation. The predictive content of the first-release outcomes is important, because these figures are an input for the next budget and...

Interest groups are introduced in a spatial model of electoral competition between two political parties. We show that, by coordinating voting behavior,these interest groups increase the winning set, which is defined as the set of policy platforms for the challenger that will defeat the...