THE GOVERNMENT SPENDING ON AGRIBUSINESS SECTOR MODEL

This paper studies relation between government spending on agribusiness sector and the political business cycles. Governments try to improve their reelection prospects with the help of expansionary fiscal policies. Rising fiscal deficits before elections are followed by fiscal consolidation afterwards. Namely, this paper examines the relation between elections and government spending on agribusiness sector. It is supposed that government expenditure has been grouped into two categories: social protection and “economic affairs”. Further, it is supposed that the category 'economic affairs' covers support programmes, subsidies and public infrastructure spending in the agribusiness sector. Therefore, the structure of government expenditure is summarized by a downward-sloping curve, yielding a trade-off between government spending on social protection (as a short-run goal before election) and government spending on “agribusiness affairs” (as a long-run goal afterward). An opportunistic incumbent policy-maker has no preferences over government spending on social protection and government spending on “agribusiness affairs” per se and cares only about re-election. Government spending much more on social protection versus “agribusiness affairs” increases before elections. The basic aim of this paper is to set the model which describes the cyclical movement of the government spending on agribusiness sector. This model explains why government intervention causes cyclical movement of the government spending on agribusiness sector. The main source of conflict occurs between the short-run and long-run government goals.


Issue Date:
2013-09
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/161816
Page range:
297-305
Total Pages:
11
JEL Codes:
Q10; H50; H30




 Record created 2017-04-01, last modified 2017-04-26

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