Four Budget Deficit Theories In One Model

Authors

  • Jens Peter Siebel
  • Athanassios Pitsoulis

Abstract

The analysis of many budget deficit theories is too demanding for undergraduate students. This paper illustrates governments’ incentives to create budget deficits by means of a simple graphical model. It integrates four budget deficit theories: The theory of the state as Leviathan, two different strategic deficit theories, and the theory of tax competition. These theories are embedded into an illustrative example of political competition between a conservative party and a liberal party. The main pedagogical benefits of the model are its intuitive setup and its waiver of demanding analysis.

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Published

2011-08-18