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The political business cycle under rational voting behavior

✍ Scribed by Ulrich Lächler

Publisher
Springer US
Year
1984
Tongue
English
Weight
988 KB
Volume
44
Category
Article
ISSN
0048-5829

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✦ Synopsis

This essay argues that politically motivated business cycles could persist in a democratic society even if the electorate votes in a rational, fully informed manner, provided that government policymakers have the means to systematically generate macroeconomic fluctuations. This cyclic outcome reflects the preferences of an electorate that is composed of imperfectly altruistic voters belonging to different overlapping generations. Since each generation has a different horizon over which it would like to have elected politicians provide an optimal economic policy plan, an intergenerational conflict of interests situation arises. This conflict is placed into an explicit political context, whereby cycles become generated under the institutional constraint of periodic elections.

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