Citation

Discussion Paper Details

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Title: Debt-sensitive Majority Rules

Author(s): Johannes Gerd Becker, Hans Gersbach and Oliver Grimm

Publication Date: June 2010

Keyword(s): debt restriction, debt-sensitive majority rule, fiscal policy, public debt, public goods, simple majority rule and voting

Programme Area(s): Public Economics

Abstract: We examine debt-sensitive majority rules. According to such a rule, the higher a planned public debt, the higher the parliamentary majority required to approve it. In a two-period model we compare debt-sensitive majority rules with the simple majority rule when individuals differ regarding their benefits from public-good provision. We establish the existence of Condorcet winners under debt-sensitive majority rules and derive their properties. We find that equilibrium debt-levels are lower under the debt-sensitive majority rule if preferences regarding public goods are sufficiently heterogeneous and if the impact of debt on future public-good provision is sufficiently strong. We illustrate how debt-sensitive majority rules act as political stabilizers in the event of negative macroeconomic shocks.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7860

Bibliographic Reference

Becker, J, Gersbach, H and Grimm, O. 2010. 'Debt-sensitive Majority Rules'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7860