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Influences on Deficit Spending in Industrialized Democracies*

Published online by Cambridge University Press:  03 March 2009

Sung Deuk Hahm ,
Mark S. Kamlet  and
David C. Mowery
Sung Deuk Hahm
Affiliation:
Public Policy and Business Schools, Georgetown University
Mark S. Kamlet
Affiliation:
Public Policy, Carnegie Melton University
David C. Mowery
Affiliation:
Business School, University of California at Berkeley and Canadian Institute of Advanced Research
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Abstract

Since 1945, there has been substantial variation among the OECD countries and within them over time in central-government deficits. This paper surveys and assesses the literature on deficit spending in these industrialized democracies, emphasizing positive theories and the empirical support, or lack thereof, for each of them. We begin by considering the degree to which theories about the size of government and empirical tests of these theories about the level of overall government spending can explain deficits. We then survey theories pertaining to the political economy of fiscal deficits per se, including the ‘tax smoothing’ hypothesis, the neo-Keynesian countercyclical hypothesis, the public choice perspective, the ‘left-right ideology’ hypothesis, Roubini and Sachs' (1989) ‘strength of government’ hypothesis, and the importance of divided government in non-parliamentary systems.

Type
Articles
Information
Journal of Public Policy , Volume 15 , Issue 2 , May 1995 , pp. 183 - 197
Copyright
Copyright © Cambridge University Press 1995

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