Abstract
Field data on the strategic use of deficits to limit thebudgetary scope of future governments are inconclusive aboutthe effects of political polarization or a government'sre-election probability on fiscal policy. Therefore, wedesigned a controlled experiment to examine the strategic useof deficits. Using a within-subjects design, we find thatdeficits rise with a higher degree of polarization and a lowerreelection probability. However, in a between-subjects designneither polarization nor reelection probabilities have asystematic effect. We discuss the implications of ourexperimental results for empirical tests of the strategic useof deficits with field data.
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Sutter, M. The Political Economy of Fiscal Policy: An Experimental Study on the Strategic Use of Deficits. Public Choice 116, 313–332 (2003). https://doi.org/10.1023/A:1024842401703
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DOI: https://doi.org/10.1023/A:1024842401703