DP1428 Voting for Jobs: Policy Persistence and Unemployment
|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.