Devouring the Leviathan: Fiscal Policy and Public Expenditure in Colombia

58 Pages Posted: 9 Apr 2010

See all articles by Fernando Estrada

Fernando Estrada

Universidad Externado de Colombia - Facultad de Finanzas, Gobierno y Relaciones Internacionales

Date Written: April 8, 2010

Abstract

Overall, this paper presents a white swan that seems to confirm the hypothesis of Alesina/Tabellini/Campante (2008). Fiscal policy in many developing countries is procyclical. Specifically, the former may explain monetary policy failures associated with problems of political agency. And in this case, the trend of the cycles is caused by voters who seek to devour the Leviathan by reducing their incomes. In these cases, voters observe the conditions of the economy, but not willing to cover the costs of corrupt governments. When they observe a boom, voters optimally demand more public goods or lower taxes, and this induces a procyclical bias in fiscal policy. The empirical evidence is consistent with this explanation: Procyclicality of fiscal policy is more pronounced in more corrupt democracies.

Keywords: Colombia, procyclical economy, tax power, redistributive justice, state controls

JEL Classification: E6, E70, A1, H2, H5, H7, H71, B2

Suggested Citation

Estrada, Fernando, Devouring the Leviathan: Fiscal Policy and Public Expenditure in Colombia (April 8, 2010). Available at SSRN: https://ssrn.com/abstract=1586659 or http://dx.doi.org/10.2139/ssrn.1586659

Fernando Estrada (Contact Author)

Universidad Externado de Colombia - Facultad de Finanzas, Gobierno y Relaciones Internacionales ( email )

Calle 12 # 0 - 85 Este, Barrio La Candelaria
Bogota, DC Cundinamarca 1267
Colombia
05-71 - 3419900 - ext. 1202 (Phone)

HOME PAGE: http://ideas.repec.org/f/pga454.html

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