This paper examines why fiscal policy is procyclical in developing as well as developed countries. We introduce the concept of fiscal transparency into a model of retrospective voting, in which a political agency problem between voters and politicians generates a procyclical bias in government...

In Bogota reforms in 1991 blocked a market for buying and selling of votes. The patronage lost effectiveness, citizens developed a vote of opinion and the city demonstrated an outstanding performance in the provision of public goods and services. This story is illustrated by a new panel with...

In the twentieth century there was a significant trend towards larger local governments through amalgamations in the western world. Amalgamations provide potential economic benefits but might also give rise to costs driven by opportunistic political behavior. This study uses a compulsory...

I study the effect of voters with a group-based social conscience. Voters then care more about the well-being of those belonging to their own group than the rest of the population. Within a model of political tax determination, both fractionalization and group antagonism reduce the support for...

This paper proposes a dynamic politico-economic theory of debt, government finance and expenditure. Agents have preferences over a private and government-provided public good, financed through labour taxation. Subsequent generations of voters choose taxation, government expenditure and debt...

We use real-time annual data on the fiscal balance, government current spending, current revenues and net capital outlays as published at a half yearly frequency in the OECD Economic Outlook for 25 OECD countries. For each fiscal year t we have a number of forecasts, a first release, and...

The authors set up a political economy equilibrium framework for personal income distribution. Located in status theory, their concept is able to explain what justifies a certain or optimal degree of inequality in the society. The authors present an empirical analysis of personal income...

The political budget cycle (PBC) literature argues that governments expand deficits in election years. However, what happens when an economic downturn is expected? Will the government allow the deficit to expand even further, or will it resort to spending cuts and tax increases? When voters...

Recent research has demonstrated that while government expenditures are countercyclical inmost industrialized countries, they tend to be procyclical in developing countries. We develop adynamic political economy model to explain this phenomenon. In the model, public expendituresprovide insurance...