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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. Alberto Alesina & Roberto Perotti, 1996. "Budget Deficits and Budget Institutions," IMF Working Papers 96/52, International Monetary Fund.
  2. Ernesto Stein & Ernesto Talvi & Alejandro Grisanti, 1998. "Institutional Arrangements and Fiscal Performance: The Latin American Experience," NBER Working Papers 6358, National Bureau of Economic Research, Inc.
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  17. Wyplosz, Charles, 2002. "Fiscal Policy: Institutions versus Rules," CEPR Discussion Papers 3238, C.E.P.R. Discussion Papers.
  18. Gleich, Holger, 2003. "Budget institutions and fiscal performance in Central and Eastern European countries," Working Paper Series 0215, European Central Bank.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Mody on Institutional Change
    by Karl Whelan in The Irish Economy on 2010-07-23 10:19:26
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