Debt-Sensitive Majority Rules

Konferenzbeitrag

We examine debt-sensitive majority rules. According to such a rule, the higher a planned public debt, the higher the necessary parliamentary majority to approve it. In a two-period model, we compare debt-sensitive majority rules with the simple majority rule when individuals differ regarding their benefits from public good provision. We establish the existence of Condorcet winners under debt-sensitive majority rules and derive their properties. We find that equilibrium debt-levels are lower under the debt-sensitive majority rule if preferences regarding public goods are sufficiently heterogeneous and if the impact of debt on future public good provision is sufficiently strong. We illustrate how debt-sensitive majority rules act as political stabilizers of negative macroeconomic shocks.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Political Economy: The Effect of Constitutional Rules ; No. C17-V1

Classification and Topics

• Classification: Wirtschaft ; National Debt; Debt Management; Sovereign Debt ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior ; Policy Objectives; Policy Designs and Consistency; Policy Coordination
• Subject: fiscal policy ; public debt ; public goods ; voting ; simple majority rule ; debt-sensitive majority rule ; debt restriction

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Grimm, Oliver ; Becker, Johannes ; Gersbach, Hans
• Event: Veröffentlichung
• (who): Verein für Socialpolitik
• (where): Frankfurt a. M.
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/37249