Joint Discussion Paper Series in Economics 08-2013
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 upperclass leaders.
budget deficit political leaders socioeconomic status time preference