Debt-Sensitive Majority Rules
52 Pages Posted: 19 Jul 2010
Date Written: June 2010
Abstract
We examine debt-sensitive majority rules. According to such a rule, the higher a planned public debt, the higher the parliamentary majority required to approve it. In a two-period model we compare debt-sensitive majority rules with the simple majority rule when individuals differ regarding their benefits from public-good provision. We establish the existence of Condorcet winners under debt-sensitive majority rules and derive their properties. We find that equilibrium debt-levels are lower under the debt-sensitive majority rule if preferences regarding public goods are sufficiently heterogeneous and if the impact of debt on future public-good provision is sufficiently strong. We illustrate how debt-sensitive majority rules act as political stabilizers in the event of negative macroeconomic shocks.
Keywords: debt restriction, debt-sensitive majority rule, fiscal policy, public debt, public goods, simple majority rule, voting
JEL Classification: D72, E61, H41, H63
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
A Dynamic Theory of Public Spending, Taxation and Debt
By Marco Battaglini and Stephen Coate
-
By Pierre Yared
-
Rotten Parents and Disciplined Children: A Politico-Economic Theory of Public Expenditure and Debt
By Zheng Michael Song, Kjetil Storesletten, ...
-
Rotten Parents and Disciplined Children: A Politico-Economic Theory of Public Expenditure and Debt
By Zheng Michael Song, Kjetil Storesletten, ...
-
Inefficiency in Legislative Policy-Making: A Dynamic Analysis
By Marco Battaglini and Stephen Coate
-
Investment Cycles and Sovereign Debt Overhang
By Mark Aguiar, Manuel Amador, ...
-
Dynamic Mirrlees Taxation Under Political Economy Constraints
By Daron Acemoglu, Mikhail Golosov, ...