We study the interdependence of optimal tax and expenditure policies. An optimal policy requires that information on preferences is made available. We first study this problem from a general mechanism design perspective and show that efficiency is possible only if the individuals who decide on...

When politicians have lower discount factors than voters, democratic elections cannot sufficiently motivate politicians to undertake long-term socially beneficial projects. When politicians can offer incentive contracts which become effective upon reelection, the hierarchy of contracts and...

When politicians have lower discount factors than voters, democratic elections cannot sufficiently motivate politicians to undertake long-term socially beneficial projects. When politicians can offer incentive contracts which become effective upon reelection, the hierarchy of contracts and...