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Political competition and public spending Political competition and public

March 25, 2024 0 Comments

spending Share on Twitter Share on Facebook Share on LinkedIn Compartment in Google Plus By Osvaldo .Does a very close dispute between two or more political parties fighting for governorship limit the increase in state expenditures? Or, on the contrary, does it favor expansionary spending behavior? A standard assumption in economic models that analyze political markets is that rulers make decisions about increases in public spending by comparing the probability of losing office, due to an increase in tax pressure to finance it, with the utility they obtain from that increase. of spending, in terms of power and personal benefits.

In this context, the fact that the ruling party can

Challenged by the opposition through democratic elections is key to mitigating fiscal illusion and providing a credible threat to the rulers that they may suffer an electoral Canada WhatsApp Data  defeat, with the consequent loss of utility. , if taxes increase. In other words, the underlying assumption in this model is that rulers face a hard budget constraint. However, this is not the usual situation faced by politicians in some subnational jurisdictions that finance a significant fraction of their local expenditures with discretionary transfers from the central government. This is the case of federations such as Argentina, Brazil, Russia and Venezuela. In particular citizens and local authorities.

On the one hand, voters are motivated to reward

Governors who are competent in extracting resources from the central government.  Since it replaces the local tax burden for a given expenditure. On the  Canada WhatsApp Number List other hand.  Governors enjoy a large share of the political benefit of spending and pay only a fraction of the political cost of taxes. Most of the money allocated to public goods comes from the “common fund” of resources administered by the central government. Local authorities use the additional low-cost purchasing power granted by federal transfers to networks. Increase public employment, and direct subsidies to voters, thus improving their  model described above predicts, may end up increasing it.

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