Political Leaders' Socioeconomic Background and Public Budget Deficits: Evidence from OECD Countries
MAGKS Joint Discussion Paper No. 08-2013
32 Pages Posted: 16 Feb 2013 Last revised: 12 Dec 2014
Date Written: February 13, 2014
This paper empirically analyses the relationship between political leaders socioeconomic backgrounds and public budget deficits utilising panel data on 21 OECD countries from 1980 to 2008. Building on sociological, as well as economic, research, we argue that the socioeconomic status of political decision-makers, i.e., presidents or prime ministers, is an important determinant of fiscal budget decisions. Our theory-consistent findings show that the tenures of lower-class leaders i.e., leaders of low socioeconomic status are associated with a deficit-to-GDP ratio which is 1.6 percentage points higher than that during tenures of upper-class leaders.
Keywords: Budget deficit, political leaders, socioeconomic status, time preference
JEL Classification: E62, H11, H62, Z13
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