Political Uncertainity, Public Expenditure and Growth
University of Glasgow - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
University of Strathclyde, Glasgow - Strathclyde Business School - Department of Economics
University of Glasgow - Department of Economics
CESifo Working Paper Series No. 310
We focus on the link between political instability due to uncertain electoral outcomes and economic growth, through the impact on a government's decisions on how to allocate government expenditure between public consumption and investment. Using an endogenous growth model with partisan electoral effects, we demonstrate that political uncertainty will generate a steady-state equilibrium growth rate which is inefficient and too low. We also use a newly-constructed political data set to estimate panel regressions for several OECD economies over a period 1960-95. Our empirical evidence on the effects of political variables on tax and spending decisions supports our theoretical results.
Number of Pages in PDF File: 36
Keywords: Endogenous growth, public consumption and investment, political uncertainty, panel regressions, OECD countries
JEL Classification: O41, H50, E61working papers series
Date posted: March 21, 2001
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