In this paper Tabellini's and Alesina's (1990) median voter model for the explanation of budget deficits is modified by endogenizing the private sector. Debt finance is supplemented by taxing a private consumption which serves as an additional source of revenue for funding the public sector. The...

The consequences of ageing populations for federal and state fiscal policies are, due to the research efforts of the last two decades, well known. However, it is rather less well known how the municipal level is affected. Therefore, by using a modification of the sustainability definition...

The analysis provides a new explanation for two widespread problems concerning European unemployment policy: the disappointingly small effect of many past reform measures on unemployment, and the political difficulties in implementing more extensive reform programs. We argue that the heart of...

We investigate the behavior of the unemployment rate after a government expenditure shock and present evidence that the group of asset-holding households reacts very different from the group of liquidity-constrained consumers. Our findings suggest that the unemployment rate is likely to decrease...

This paper contributes to the literature on the role of decentralization in hardening the budget constraint of public enterprises. Following Qian and Roland the study adopts a ‘federalist’ approach. However, it interprets federalism as the upward devolution of domestic economic policies to a...

We present a framework of investigation into the political economy of the budget process. Our model suggests that institutional rules governing the budget process can be found to limit the importance of fiscal illusion. Empirical evidence supports that proposition. The choice of rules depends on...

In April 2023, the European Commission issued a directive proposal on EU economic governance reform. The Council cut some tasks of Independent Fiscal Institutions (IFIs) that were in the Commission directive proposal; whether this cutting is justified is an open question. Early this year, the...

Cloyne (2013) constructs a novel dataset documenting fiscal tax shocks in the United Kingdom using the narrative approach developed by Romer and Romer (2010), and estimates the impact of tax changes on GDP. He finds that a tax cut of one percent of GDP causes a 0.6 percent increase in output in...

Budget reliability is the first pillar of Public Expenditure and Financial Accountability (PEFA). In this study, we construct an expansion of the PEFA government response accuracy indicator and test its decomposition, with an application to the government budgets and state general accounts of...

The use of large fiscal stimulus packages to dampen the impact of Covid-19 recently has raised concerns about the effectiveness of the discretionary fiscal policy. This paper aims at analysing the feasibility of automatic fiscal stabilisers to mitigate economic fluctuations in the case of...