We consider an economy where competing political parties alternate in office. Due to rent-seeking motives, incumbents have an incentive to set public expenditures above the socially optimum level. Parties cannot commit to future policies, but they can forge a political compromise where each...

We consider an economy where competing political parties alternate in office. Due to rent-seeking motives, incumbents have an incentive to set public expenditures above the socially optimum level. Parties cannot commit to future policies, but they can forge a political compromise where each...

This work provides a macroeconomic approach and a sound conceptual foundation for the notion of competitiveness gains, so prone to multiple interpretations, and to make it fit for empirical analyses. Instead of competitiveness is competitiveness gains the relevant concept, defined as a situation...