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Title:Debt-Sensitive Majority Rules PDF Logo
Authors:Grimm, Oliver
Becker, Johannes
Gersbach, Hans
Issue Date:2010
Series/Report no.:Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Political Economy: The Effect of Constitutional Rules C17-V1
Abstract:We examine debt-sensitive majority rules. According to such a rule, the higher a planned public debt, the higher the necessary parliamentary majority to approve it. In a two-period model, we compare debt-sensitive majority rules with the simple majority rule when individuals differ regarding their benefits from public good provision. We establish the existence of Condorcet winners under debt-sensitive majority rules and derive their properties. We find that equilibrium debt-levels are lower under the debt-sensitive majority rule if preferences regarding public goods are sufficiently heterogeneous and if the impact of debt on future public good provision is sufficiently strong. We illustrate how debt-sensitive majority rules act as political stabilizers of negative macroeconomic shocks.
Subjects:fiscal policy
public debt
public goods
simple majority rule
debt-sensitive majority rule
debt restriction
Document Type:Conference Paper
Appears in Collections:Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie

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