Productive Government Spending, Growth, and Sequential Voting

In: European journal of political economy, Band 19, Heft 2, S. 227-246

Abstract

This paper considers an endogenous growth model with productive government spending in which overlapping generations of agents vote sequentially on policy. With sequential majority voting, there is a multiplicity of politico-economic equilibria originating from self-fulfilling policy expectations. Some of these equilibria are Pareto-inefficient & there are endogenous cycles. A constitutional rule providing partial commitment significantly shrinks the set of politico-economic equilibria, removing all inefficiencies & cycles. However, a likely outcome is that government size is too high relative to the growth-maximizing size. 3 Figures, 1 Appendix, 22 References. Adapted from the source document.