In this paper, we compare growth and welfare effects of various budget rules within an endogenous growth model with productive public capital, utility enhancing public consumption and public debt. We find that a fixed deficit regime does not affect the long run growth rate compared to a balanced...

We introduce public capital and public services as inputs in an endogenous growth model. We show that the growth rate depends on the apportionment of tax revenues between the accumulation of public capital and the provision of public services. When public spending is financed by proportional...

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...

It is by now a widely shared insight that fiscal policy needs to be re-strengthened as a macroeconomic policy instrument within European macroeconomic policies: Recent experiences with austerity policies, new research regarding the size of the fiscal multiplier and the fact that monetary policy...

We examine how electoral motives influence active labor market policies that promote job-creation. Such policies reduce unemployment statistics. Using German state data for the period 1985 to 2004, we show that election-motivated politicians pushed job-promotion schemes before elections. --...

Most theorists of public finance treat budgeting as a technical problem concerned centrally with projecting revenues and expenses. To the contrary, I treat budgeting as a political problem, with technical matters serving to obscure more than illuminate the political economy of budgeting. This...

This volume includes five self-contained chapters in the fields of public debt and fiscal transfer schemes. After an introduction to the topic, chapter 2 shows that the institutional setting of fiscal policy making needs to be considered when assessing the sustainability of fiscal policy. Using...

How important is the enforcement of political rights in new democracies? We use the enfranchisement of the emancipated slaves following the American Civil War to study this question. Critical to our strategy, black suffrage was externally enforced by the U.S. Army in ten Southern states during...

Government debt is an indirect debt of the taxpayers, and can be classified as internal or external. Debt crisis is the general term for a proliferation of massive public debt relative to tax revenues. Public debt enables governments to invest in critical areas of the economy where the capacity...

Income distribution may be related to fundamentals affecting economic growth and to labor market policies. Noting that inequality is affected by unemployment. This paper presents a model in which labor market policies affect unemployment which in turn affects inequality. The model also includes...