This paper analyzes a model in which a group of rational individuals votes over the composition and time profile of public spending. All voters agree that a balanced budget is ex ante optimaL However, if there is disagreement between current and future majorities, a balanced budget is not a political equilibrium under majority rule. Under certain conditions a majority of the voters favors a budget deficit, and the equilibrium deficit is larger the greater is the polarization among voters. (JEL 320,025)
Voting on budget deficit
TABELLINI, GUIDO
1990
Abstract
This paper analyzes a model in which a group of rational individuals votes over the composition and time profile of public spending. All voters agree that a balanced budget is ex ante optimaL However, if there is disagreement between current and future majorities, a balanced budget is not a political equilibrium under majority rule. Under certain conditions a majority of the voters favors a budget deficit, and the equilibrium deficit is larger the greater is the polarization among voters. (JEL 320,025)
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