CRIEFF Discussion Paper Number 0023

Deficits, Coalition Effects and the Timing of Decisions

Gerald Pech

Abstract
This paper develops an intertemporal model of legislative bargaining in the presence of distorting redistributive instruments. It includes negotiations in the cabinet and in the parliament that acts with or without coalitional discipline. We focus on the comparison of outcomes with negotiations on a debt target prior to tax spending decisions to outcomes where the level of debt is renegotiated. In the cabinet, a switch to targeting procedures allows for local improvements in debt policies. In the parliament with lack of coalitional discipline targeting results in a materially balanced budget.

JEL Classifications
H61, H62, D78

Keywords
Public debt, Budgeting, Non cooperative bargaining

Gerald Pech
May Wong Smith Fellow, CRIEFF

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