Celentani, Marco; Conde-Ruiz, J. Ignacio; Desmet, Klaus - In: Review of Economic Dynamics 7 (2004) 3, pp. 758-787
We analyze risk sharing and endogenous fiscal spending in a two-region model with sequentially complete markets. Fiscal policy is determined by majority voting. When policy setting is decentralized, regions choose fiscal spending in an attempt to manipulate security prices. This leads to...