The Dynamics Of Public Investment Under Persistent Electoral Advantage

This paper studies the effects of asymmetries in re-election probabilities across parties on public policy and its subsequent propagation to the economy. The struggle between opposing groups - that disagree on the composition of public consumption - results in governments being endogenously short-sighted: systematic under investment in infrastructure and overspending on public goods arise, as resources are more valuable when in power. Because the party enjoying an electoral advantage is relatively less short-sighted, it devotes a larger proportion of government revenues to productive public investment.

Provided by: Federal Reserve Bank of Philadelphia Topic: Security Date Added: Jun 2011 Format: PDF

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