Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/75639
Authors: 
Darby, Julia
Li, Chol-Won
Muscatelli, Anton
Year of Publication: 
2000
Series/Report no.: 
CESifo Working Paper 310
Abstract: 
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.
Subjects: 
Endogenous growth
public consumption and investment
political uncertainty
panel regressions
OECD countries
Document Type: 
Working Paper

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