Sins of the elder: Fiscal illusion in democracies.

• Autores: Paulo Reis Mourâo
• Localización: Hacienda Pública Española / Review of Public Economics, ISSN 0210-1173, Nº 196, 2011, págs. 9-36
• Idioma: inglés
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• Resumen

  • This work discusses the implications of democratic maturity on levels of Fiscal Illusion. Its main contribution is to identify the relevance of good-governance institutions that prevent incumbents in established democracies from degenerating into electoral rent-seekers. This work develops a model that converges with a Gordon (1989) type theorem. This theorem predicts that some countries ruled by incumbents are more likely to revert to FI practices as the electorate�s maturity increases and if there are no strong restrictions on the social acceptance of political rents. Our empirical results show that democratic maturity tends to diminish fiscal illusion.