Abstract
The paper assesses the relative explanatorypower of the Keynesian, the optimalfinance, the contingent liability andseveral public choice theories of thedeterminants of public deficits on Italian1950–1998 data. A vector error correctionmodel suggests that deficits are sensitiveto unemployment levels, interest groups'preferences (especially the elderly),government fragmentation, changes in thedegree of stringency of budget rules andexternal economic constraints. Data insteadprovide a weak or no support to thehypotheses that deficits respond to outputgrowth and electoral events. Theimplications of the optimal finance and ofthe contingent liability theory arerejected as well.
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Galli, E., Padovano, F. A Comparative Test of Alternative Theories of the Determinants of Italian Public Deficits (1950–1998). Public Choice 113, 37–58 (2002). https://doi.org/10.1023/A:1020398628277
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DOI: https://doi.org/10.1023/A:1020398628277