In a dynamic model of fiscal policy, social polarization provokes a deficit bias. Policy advisors have recently proposed that governments running a deficit should be forced to generate additional tax revenue. We show that this deficit taxation reduces the deficit bias as it internalizes the...

In a dynamic model of fiscal policy, social polarization provokes a deficit bias. Policy advisors have recently proposed that governments running a deficit should be forced to generate additional tax revenue. We show that this deficit taxation reduces the deficit bias as it internalizes the...

This chapter considers the role of economic and political institutions in the formation of local public policies. The chapter has three objectives. First, to synthesize the dominant models of local policy formation with mobile households, with particular emphasis on the objectives that are...