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Sustainability of Fiscal Policy in Democracies and Autocracies

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Wurster, Stefan

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Abstract This paper tries to identify the fiscal sustainability record of democratically and autocratically governed countries by applying various performance indicators (credit worthiness, payment defaults, national debt, foreign assets) and also to clarify what effect the characteristics of a regime have on consolidation efforts in a country. The study identifies two key findings. While in the past, democracies have clearly found it easier to preserve their credit standing and solvency and to avoid government bankruptcy, a similar advantage can no longer be detected for democracies in terms of reducing national debt and foreign debts. Why democracies, in spite of their arrangements with a sensitivity for the public good and for due process, are finding it so difficult to avoid shifting their debts to future generations, to undertake cutback measures and to provide sufficient financial foresight, can in principle be interpreted as the other side of the coin, namely highly presence-oriented interests boosted even further through the short "democracy-specific time horizon".
Keywords fiscal policy; solvency; national debt; budget consolidation; sustainability; tax revenue; inflation; austerity policy; political system; dictatorship; democracy
Classification Economic Policy; Political System, Constitution, Government
Document language English
Publication Year 2015
Page/Pages p. 1-15
Journal Challenges in Sustainability, 3 (2015) 1
Status Published Version; peer reviewed
Licence Creative Commons - Attribution