A theory of political and economic cycles

• 成果类型: Article
• 署名作者: Ales, Laurence; Maziero, Pricila; Yared, Pierre
• 署名单位: Carnegie Mellon University; University of Pennsylvania; Columbia University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2014.07.004
• 发表日期: 2014
• 页码: 224-251
• 关键词: Optimal taxation; political economy; fiscal policy; Asymmetric and private information

摘要

We develop a theoretical framework in which political and economic cycles are jointly determined. These cycles are driven by three political economy frictions: policymakers are non-benevolent, they cannot commit to policies, and they have private information about the tightness of the government budget and rents. Our first main result is that, in the most favorable equilibrium to the households, distortions to production emerge and never disappear even in the long run. This result is driven by the interaction of limited commitment and private information on the side of the policymaker, since in the absence of either friction, there are no long run distortions to production. Our second result is that, if the variance of private information is sufficiently large, there is equilibrium turnover in the long run so that political cycles never disappear. Finally, our model produces a long run distribution of taxes, distortions, and turnover, where these all respond persistently to temporary economic shocks. (C) 2014 Elsevier Inc. All rights reserved.