Dynamic fiscal competition: A political economy theory

• 成果类型: Article
• 署名作者: Arcalean, Calin
• 署名单位: Universitat Ramon Llull; Escuela Superior de Administracion y Direccion de Empresas (ESADE); Leibniz Association; Ifo Institut
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2018.06.002
• 发表日期: 2018
• 页码: 211-224
• 关键词: Political economy; public spending; public debt; Economic integration

摘要

I develop a political economy theory of dynamic fiscal competition via public spending and debt. With internationally mobile capital, strategic policies generate two cross-border externalities that voters in each country fail to internalize: (1) an increase in public spending that bolsters capital accumulation but also (2) a race to the top in public debt which crowds out capital. The relative size of these two externalities varies with the number of financially integrated countries and interacts with the domestic political conflict between young and old voters. Despite residence based taxation, capital tax rates are lower under strategic policies than under coordination. Furthermore, they may decline with financial integration. Strategic policies lead to lower long run output and welfare relative to coordination but are preferred by subsequent generations of voters if the number of financially integrated countries is low or the political weight of the young is high. (C) 2018 Elsevier B.V. All rights reserved.