DP1428 Voting for Jobs: Policy Persistence and Unemployment

Author(s): Gilles Saint-Paul
Publication Date: June 1996
Keyword(s): Fiscal Policy, Job Creation, Political Economy, Public Spending, Unemployment, Voting
JEL(s): E62, H2, H5, J6
Programme Areas: International Macroeconomics, Human Resources
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1428

This paper studies, in a model with unemployment, how labour market status affects the preferences for public spending, in the form of a public good or subsidies. It then derives the implications for the dynamics of government expenditures under the hypothesis of majority voting. These will exhibit positive persistence if the employed are marginally more powerful than the unemployed, and negative persistence if the unemployed are marginally more powerful. Under a uniform distribution of tastes for the public good, there is no persistence. The preferences of the unemployed may be non-single-peaked, so that high unemployment may destroy the existence of a voting equilibrium.