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
Article

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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Copyright information

© Kluwer Academic Publishers 2003

Authors and Affiliations

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

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