In common pool models fiscal outcomes are determined by the decision-making rule that is used to aggregate conflicting interests into a single budget. The rules according through which the budget is prepared, approved and carried out can affect spending bias. This paper analyses a model in which the minister of finance internalizes the common pool externality of the budget. From an institutional point of view, this assumption is realistic because he takes in account the budget equilibrium. Formally, this is reflected in the assumption that the minister of finance maximizes à la Stackelberg his utility function. In Stackelberg equilibrium, leader's expenditure choice is grater than in Cournot-Nash result, while the deficit bias is lower due to agenda setting power over spending ministers.

The Common Pool Problem of Intergovernmental Interactions and Fiscal Discipline: A Stackelberg Approach

Bimonte Giovanna
Membro del Collaboration Group
;
2014-01-01

Abstract

In common pool models fiscal outcomes are determined by the decision-making rule that is used to aggregate conflicting interests into a single budget. The rules according through which the budget is prepared, approved and carried out can affect spending bias. This paper analyses a model in which the minister of finance internalizes the common pool externality of the budget. From an institutional point of view, this assumption is realistic because he takes in account the budget equilibrium. Formally, this is reflected in the assumption that the minister of finance maximizes à la Stackelberg his utility function. In Stackelberg equilibrium, leader's expenditure choice is grater than in Cournot-Nash result, while the deficit bias is lower due to agenda setting power over spending ministers.
2014
9783319050133
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11386/4400053
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