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Public Debt, Migration, and Shortsighted Politicians
Author(s) -
Schultz Christian,
Sjöström Tomas
Publication year - 2004
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/j.1467-9779.2004.00185.x
Subject(s) - debt , externality , economics , politics , public finance , internal debt , monetary economics , debt levels and flows , macroeconomics , microeconomics , political science , law
We analyze a model where local public debt levels are set by politicians who are chosen in local elections. Migration causes an externality across districts, and leads to overaccumulation of local public debt. Since debt is a strategic substitute , the median voters in each district prefer shortsighted political leaders who “borrow and spend,” thereby exacerbating the problem of overaccumulation of local public debt.