hero working papers

Towards Micropolitical Foundations of Public Finance

Number: 119
Year: 1997
Author(s): Torsten Persson (IIES, Stockholm University), Gerard Roland (Universit Libre de Bruxelles) and Guido Tabellini (IGIER, Università Bocconi)

Now in:
European Economic Review, April 1998

Observed fiscal policy reflects the incentives embedded in political institutions. In this paper, we illustrate the effects of two general institutional features: separation of powers, which is common in Presidential-Congressional political systems, and legislative cohesion, which is typical of parliamentary systems. Compared to a simple legislative game, separation of powers brings about a smaller size of government and lower waste, whereas legislative cohesion induces a more equal distribution, but more waste and higher taxes.