Public Choice

, Volume 116, Issue 3–4, pp 313–332 | Cite as

The Political Economy of Fiscal Policy: An Experimental Study on the Strategic Use of Deficits

  • Matthias Sutter


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.


Experimental Study Control Experiment Field Data Political Economy Public Finance 
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Copyright information

© Kluwer Academic Publishers 2003

Authors and Affiliations

  • Matthias Sutter
    • 1
  1. 1.Institute of Public EconomicsUniversity of InnsbruckInnsbruckAustria

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