Scandinavian Working Papers in Economics

Seminar Papers,
Stockholm University, Institute for International Economic Studies

No 722: Intra-Generational Conflict: The Role of Balanced Budget Rules

Dirk Niepelt ()
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Dirk Niepelt: Institute for International Economic Studies, Stockholm University, Postal: Stockholm University, S-106 69 Stockholm, Sweden

Abstract: A balanced budget requirement directly affects the intra-generational wealth distribution and influences the level of government spending. Both effects give rise to distributive conflicts that can explain why some groups support balanced budget rules while other groups in the same generation oppose them. Simulations suggest that such distributive conflicts are prevalent. I argue that intra-generational distributive conflicts offer a more convincing explanation for the observed partial support for balanced budget rules than alternative theories based on inter-generational conflict or efficiency considerations.

Keywords: balanced budget rules; intra-generational conflict; government spending; wealth distribution

JEL-codes: E62; H62

26 pages, July 8, 2003

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