The Political Economy of Fiscal Policy

75 Pages Posted: 6 Apr 2007 Last revised: 28 Jan 2021

See all articles by Daniel E. Ingberman

Daniel E. Ingberman

affiliation not provided to SSRN

Robert P. Inman

University of Pennsylvania - Finance Department; National Bureau of Economic Research (NBER)

Date Written: October 1987


If there has been a dominant trend in the evolution of the modern industrial societies of this century it has been the growing importance of government in the allocation of social resources. It is important that we appreciate the fundamentally political nature of the formation of government economic policy. This survey reviews and assesses our present understanding of how the political system might shape a nation's fiscal policy. Our approach is eclectic, drawing both from economics and political science, and decidedly micro-analytic in its orientation. From economics we adopt the perspective of utility maximizing agents and the analytics of trade, agreement, and market failure. From political science we learn just how and when these individual agents might act collectively to provide public goods, redistribute income, or issue government debt. Together the micro-analytics of economics and political science form the core theory of the 'new' political economy and provide a framework for understanding the emergence, and the performance, of governments. There is no more important test for the new discipline than providing a compelling explanation for the formation of fiscal policy in democratic societies.

Suggested Citation

Ingberman, Daniel E. and Inman, Robert P., The Political Economy of Fiscal Policy (October 1987). NBER Working Paper No. w2405, Available at SSRN:

Daniel E. Ingberman (Contact Author)

affiliation not provided to SSRN

No Address Available

Robert P. Inman

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-8299 (Phone)
215-898-8200 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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