Inefficiency in Legislative Policy-Making: A Dynamic Analysis

56 Pages Posted: 29 Aug 2005 Last revised: 29 Nov 2021

See all articles by Marco Battaglini

Marco Battaglini

Princeton University - Department of Economics; Centre for Economic Policy Research (CEPR)

Stephen Coate

Cornell University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: August 2005

Abstract

This paper develops an infinite horizon model of public spending and taxation in which policydecisions are determined by legislative bargaining. The policy space incorporates both productiveand distributive public spending and distortionary taxation. The productive spending is investing ina public good that benefits all citizens (e.g., national defense or air quality) and the distributivespending is district-specific transfers (e.g., pork barrel spending). Investment in the public goodcreates a dynamic linkage across policy-making periods. The analysis explores the dynamics oflegislative policy choices, focusing on the efficiency of the steady state level of taxation andallocation of tax revenues. The model sheds new light on the efficiency of legislative policy-makingand has a number of novel positive implications.

Suggested Citation

Battaglini, Marco and Coate, Stephen, Inefficiency in Legislative Policy-Making: A Dynamic Analysis (August 2005). NBER Working Paper No. w11495, Available at SSRN: https://ssrn.com/abstract=775984

Marco Battaglini

Princeton University - Department of Economics ( email )

213 Fisher Hall
Princeton, NJ 08544
United States
609-258-4002 (Phone)
609-258-6419 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Stephen Coate (Contact Author)

Cornell University - Department of Economics ( email )

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Ithaca, NY 14853-7601
United States
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607-205-2818 (Fax)

National Bureau of Economic Research (NBER)

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