Why Do More Polarized Countries Run More Pro-cyclical Fiscal Policy?
2007/05/15
研討會日期 : 2007-05-15
時間 : 16:00
主講人 : Prof. Jaejoon Woo
地點 : B棟110室
演講者簡介 : Prof. Jaejoon Woo為Ph.D. in Economics, Harvard University(1999)。
現為Assistant Professor，DePaul University。
其主要研究領域為Growth and Productivity, Macroeconomic Policy, Political Economy, Economic Development。
演講摘要 : This paper studies the discretionary fiscal decisions and cyclical behavior of fiscal policy to explain why many countries exhibit pro-cyclical fiscal policy stances-being expansionary in good times and contractionary in bad times. We advance a new hypothesis that social polarization of preferences (arising from inequality) is a key to explaining the pro-cyclicality bias, along with supporting evidence through an extensive econometric analysis. We first develop a simple model of fiscal policy in which social polarization of preferences for the ideal composition of fiscal spending plays a crucial role in generating fiscal pro-cyclicality and fiscal volatility. We then present evidence that social polarization as measured by income inequality and educational inequality is consistently positively associated with both pro-cyclicality and volatility of fiscal policy in a late sample of countries for the period of 1960-2003, after controlling for other important variables. The pro-cyclicality and volatility of fiscal policy are in turn strongly negatively associated with growth of real GDP per capita. We carefully address the robustness of our results in terms of data, estimation methods, outlier problem, and endogeneity that often plague the standard OLS (ordinary least squares) regression.
