Political Economy of Debt and Growth

  title={Political Economy of Debt and Growth},
  author={Levon Barseghyan and Marco Battaglini},
We present a theory of endogenous fiscal policy and growth. Fiscal policy — debt, income tax, spending on local public goods and public investment — is determined through legislative bargaining. Economic growth depends directly on public investment, private investment in human capital and, via learning-by-doing, labor supply. The model predicts that the… CONTINUE READING