I present a model where disagreements about the composition of spending in a polarized and politically unstable society result in implementation of short-sighted policies and large governments. Investment rates are too low which slows down growth along the transition. In the long run, this...

The size of the Social Security program as a percentage of output has increased continuously since its inception. The main expansion has been on the extensive margin (number of individuals under the program), rather than on the intensive margin (benefits per old). Most of the increase was not...

This paper analyzes the effects of imposing constitutional fiscal restraints in a dynamic political economy model of fiscal policy. Policy choices in each period are made by a legislature consisting of representatives elected by geographically-defined districts. The legislature uses...

We explore a political-economy model of labor subsidies, extending Meltzer and Richard's median-voter model to a dynamic setting. We explore only one source of heterogeneity: initial wealth. As a consequence, given an operative wealth effect, poorer agents work harder, and if the agent with...

is an additional source of inefficiency.

During the last three decades the stock of government debt has increased in most developed countries. During the same period international capital markets have been liberalized. In this paper we develop a two-country political economy model with incomplete markets and endogenous government...

Online appendix for the Review of Economic Dynamics article

Standard real business cycle theory predicts that consumption should be smoother than output, as observed in developed coun- tries. In this paper we provide a novel explanation of the consumption volatility puzzle based on political factors. In our model groups that disagree on the size of...