We develop a political economy theory of the endogenous emergence of fiscal crises based on the idea that the adjustment mechanism to a crisis favors some social groups, that may be induced ex‐ante to vote for fiscal policies that are more likely to lead to a crisis. Greater levels of favoritism lead to a higher public debt and more frequent crises, as well as to higher public expenditure, if the favored group is large enough. We provide conditions under which the favored group strategically favors a weaker state's fiscal capacity and when constitutional limits on debt raise the utility of all poor.

Engineering Crises: Favoritism and Strategic Fiscal Indiscipline / Saint-Paul, Gilles; Ticchi, Davide; Vindigni, Andrea. - In: ECONOMICS & POLITICS. - ISSN 0954-1985. - 33:3(2021), pp. 583-610. [10.1111/ecpo.12175]

Engineering Crises: Favoritism and Strategic Fiscal Indiscipline

Davide Ticchi;
2021-01-01

Abstract

We develop a political economy theory of the endogenous emergence of fiscal crises based on the idea that the adjustment mechanism to a crisis favors some social groups, that may be induced ex‐ante to vote for fiscal policies that are more likely to lead to a crisis. Greater levels of favoritism lead to a higher public debt and more frequent crises, as well as to higher public expenditure, if the favored group is large enough. We provide conditions under which the favored group strategically favors a weaker state's fiscal capacity and when constitutional limits on debt raise the utility of all poor.
2021
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Descrizione: This is the pre-peer reviewed version of the following article: Saint-Paul, G., Ticchi, D. and Vindigni, A. (2021), Engineering crises: Favoritism and strategic fiscal indiscipline. Econ Polit, 33: 583-610. https://doi.org/10.1111/ecpo.12175, which has been published in final form at https://doi.org/10.1111/ecpo.12175. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11566/287039
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