The politics of fiscal policy: Essays in dynamic macroeconomics and political economy

My dissertation constitutes a collection of essays in dynamic macroeconomics and political economy. Using general equilibrium models where policy is endogenous, these essays study the formation of fiscal policy when both politicians and voters seek rewards for policy choices. The common attempt in each essay is to engender policies that mitigate the impact of policy choices which emerge when political interests dictate the choice of fiscal instruments. My first essay, Chapter 2, formalizes the aggregate implications of policies geared towards soliciting constituent support through the disbursement of transfer payments and public investment programs. In addition to endogenous output cycles, this essay predicts the existence of a critical threshold in output where government spending patterns change to curtail a "Wagnerian" type expansion of the welfare state. My second essay, Chapter 3, derives the aggregate implications of policy choices when voters vote and set policy. The choice of appropriate functional forms as well as an application of the median voter theorem results in policy choices that lead either to endogenous growth, or poverty traps, when voters vote with fiscal illusion. My third essay, Chapter 4, undertakes an empirical test of my first essay and finds weak evidence for the hypothesis that transfer growth in the U.S, over 1929--1994, may be viewed as an additional explanation of the productivity puzzle. My fourth essay, Chapter 5, is a theoretical note which examines appropriate fiscal policy choices that mitigate the impact of socio-politico instability on economic growth.