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Can budget institutions counteract political indiscipline?

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  • Stefania Fabrizio
  • Ashoka Mody

Abstract

"The budget is an expression of political rather than economic priorities. We confirm this proposition for a group of new and potential members of the European Union, finding that politics dominates. The contemporary practice of democracy can increase budget deficits through not only ideological preferences, but also more fragmented government coalitions and higher voter participation. Long-term structural forces, triggered by societal divisions and representative electoral rules, have more ambiguous implications but also appear to increase budget pressures, as others have also found. However, our most robust, and hopeful, finding is that budget institutions - mechanisms and rules of the budget process - that create checks and balances have significant value in curbing fiscal pressures even when the politics is representative but undisciplined, and when long-term structural forces are unfavourable." Copyright CEPR, CES, MSH, 2006.

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Bibliographic Info

Article provided by CEPR & CES & MSH in its journal Economic Policy.

Volume (Year): 21 (2006)
Issue (Month): 48 (October)
Pages: 689-739

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Handle: RePEc:bla:ecpoli:v:21:y:2006:i:48:p:689-739

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References

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  1. Philippe Aghion & Albero Alesina & Francesco Trebbi, 2002. "Endogenous Political Institutions," Harvard Institute of Economic Research Working Papers 1957, Harvard - Institute of Economic Research.
  2. Timothy Besley & Anne Case, 2003. "Political Institutions and Policy Choices: Evidence from the United States," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 7-73, March.
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  19. Mark Hallerberg & Jürgen von Hagen, 1999. "Electoral Institutions, Cabinet Negotiations, and Budget Deficits in the European Union," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 209-232 National Bureau of Economic Research, Inc.
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  1. Mody on Institutional Change
    by Karl Whelan in The Irish Economy on 2010-07-23 10:19:26
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