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Politico-Economic Determinants of Public Debt Growth: A Case Study for Austria

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  • Neck, Reinhard
  • Getzner, Michael

Abstract

Based on a number of economic and particularly politico-economic arguments, we examine the reasons for the growth of the central government's debt in Austria using time series data for the period 1960 to 1999. Starting with an empirical test of Bohn's theory of sustainability of fiscal policy, which is based on Barro's tax-smoothing model, we extend the model to account for several politico-economic variables suggested by public choice theories. Keynesian stabilization policy objectives, influences of ideology and political parties, the form of government and the political business cycle are tested regarding their ability to explain the growth of public debt in Austria. There is some empirical evidence for systematic influence of government behavior in accordance with recent public choice theories. However, it seems that the most important influence on Austrian fiscal policy is the unemployment rate, which has a significant influence on the decisions made by policy-makers. Concluding, we briefly discuss the implications of these results for the prospects of reducing public debt in Austria in the near future. Copyright 2001 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Public Choice.

Volume (Year): 109 (2001)
Issue (Month): 3-4 (December)
Pages: 243-68

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Handle: RePEc:kap:pubcho:v:109:y:2001:i:3-4:p:243-68

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Web page: http://www.springerlink.com/link.asp?id=100332

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Cited by:
  1. Gottfried Haber & Reinhard Neck, 2006. "Sustainability of Austrian public debt: a political economy perspective," Empirica, Springer, vol. 33(2), pages 141-154, June.
  2. J. Stephen Ferris, 2010. "Fiscal Policy from a Public Choice Perspective," Carleton Economic Papers 10-10, Carleton University, Department of Economics.
  3. Mackiewicz, Michał & Krajewski, Piotr, 2007. "On The Mechanisms of Achieving Fiscal (Un)Sustainability – The Case of Poland," MPRA Paper 16035, University Library of Munich, Germany.
  4. Thushyanthan Baskaran, 2010. "On the link between fiscal decentralization and public debt in OECD countries," Public Choice, Springer, vol. 145(3), pages 351-378, December.
  5. Johann Bröthaler & Michael Getzner, 2011. "Fiscal Autonomy and Total Government Expenditure: An Austrian Case-study," International Advances in Economic Research, Springer, vol. 17(2), pages 134-156, May.
  6. Moessinger, Marc-Daniel, 2012. "Do personal characteristics of finance ministers affect the development of public debt?," ZEW Discussion Papers 12-068, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  7. Reinhard Neck & Gottfried Haber, 2012. "Is the Austrian public debt sustainable?," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 4(1), pages 1-16.

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