Economic consequences of political approval management in comparative perspective

Daniel Houser, John Freeman

Research output: Contribution to journalArticle

6 Scopus citations

Abstract

We develop a dynamic, stochastic, computable general equilibrium model of political approval management and fiscal policy in order to analyze how political approval management affects United States' Presidential and United Kingdom's parliamentary business cycles. We find that governments in both systems respond to declining political approval by pursuing suboptimal fiscal policies that stimulate household consumption expenditures. Relative to a baseline optimal policy, we estimate that politically motivated fiscal policy reduces aggregate output in the United Kingdom and United States by 0.35 and 0.20%, respectively. Moreover, we find that most of the difference in output costs can be explained by differences between the American and British polities.

Original languageEnglish (US)
Pages (from-to)692-721
Number of pages30
JournalJournal of Comparitive Economics
Volume29
Issue number4
DOIs
StatePublished - Jan 1 2001

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