Do budgetary institutions mitigate the common pool problem? New empirical evidence for the EU

J. de Haan, R. Jong-A-Pin*, J. O. Mierau

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

43 Citations (Scopus)
317 Downloads (Pure)

Abstract

We analyze how budgetary institutions affect government budget deficits in member states of the European Union during 1984-2003 employing new indicators provided by Hallerberg et al. (2009). Using panel fixed effects models, we examine whether the impact of budgetary institutions on budget deficits is conditioned by political fragmentation (i.e., ideological differences among parties in government) and size fragmentation (i.e., the effective number of parties in government or the number of spending ministers). Our results suggest that strong budgetary institutions, no matter whether they are based on delegation to a strong minister of finance or on fiscal contracts, reduce the deficit bias in case of strong ideological fragmentation. In contrast, the impact of budgetary institutions is not conditioned by size fragmentation.

Original languageEnglish
Pages (from-to)423-441
Number of pages19
JournalPublic Choice
Volume156
Issue number3-4
DOIs
Publication statusPublished - Sept-2013

Keywords

  • Budgetary institutions
  • Fiscal policy
  • Political fragmentation
  • Size fragmentation
  • FRAGMENTED FISCAL-POLICY
  • DEFICITS
  • MODELS
  • DETERMINANTS
  • STATES
  • AGENCY
  • OECD

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