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Why is fiscal policy often procyclical?

Why is fiscal policy often procyclical?2005

Alberto Alesina

About this book

"Many countries, especially developing ones, follow procyclical fiscal polices, namely spending goes up (taxes go down) in booms and spending goes down (taxes go up) in recessions. We provide an explanation for this suboptimal fiscal policy based upon political distortions and incentives for less-than-benevolent government to appropriate rents. Voters have incentives similar to the "starving the Leviathan" classic argument, and demand more public goods or fewer taxes to prevent governments from appropriating rents when the economy is doing well. We test this argument against more traditional explanations based purely on borrowing constraints, with a reasonable amount of success"--National Bureau of Economic Research web site.

Details

First published
2005
OL Work ID
OL2658555W

Subjects

Fiscal policyBusiness cyclesEconometric models

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Book data from Open Library. Cover images courtesy of Open Library.