Spending cuts or tax increases? The composition of fiscal adjustments as a signal

Hideki Konishi*

*この研究の対応する著者

研究成果: Article査読

4 被引用数 (Scopus)

抄録

This paper shows that the composition of fiscal adjustments, spending cuts versus tax increases, serves as a signal of the government's degree of collusion with special interests. The politico-economic model of fiscal policies, combining retrospective voting with common-agency-type lobbying, presents undominated separating equilibria and intuitive pooling ones, in both of which fiscal adjustments with sufficiently large spending cuts lead to incumbent reappointment whereas those with only tax increases lead to incumbent defeat. These findings are consistent with the recent empirical evidence of voters behaving as fiscal conservatives. The efficiency-enhancing aspects of the signaling mechanism and the effects of imposing a deficit limit are also analyzed.

本文言語English
ページ(範囲)1441-1469
ページ数29
ジャーナルEuropean Economic Review
50
6
DOI
出版ステータスPublished - 2006 8月
外部発表はい

ASJC Scopus subject areas

  • 財務
  • 経済学、計量経済学

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