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This paper proposes a dynamic politico-economic theory of debt, government finance and expenditure. Agents have … consumption, the less debt is accumulates. We extend the analysis to redistributive policies and political shocks. The theory …
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I exploit a reform that required Italian municipalities to disclose their balance sheetsbefore elections to study whether having more informed voters aects the political budgetcycle. To start, investment spending in the year before elections is 28.5% higher thanin the election year and this...
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