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The Effects of Fiscal Institutions on Public Finance: A Survey of the Empirical Evidence

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  • Gebhard Kirchgässner

Abstract

This paper surveys the empirical research on fiscal institutions of the last three decades. The main results are: (i) Constitutional or statutory fiscal limitations have in most cases proved to be effective in cutting down public expenditure, revenue, and debt. (ii) Budgetary proce-dures matter as well. They might be less effective than constitutional or statutory rules, but in a situation where it is impossible to introduce such rules they might present a feasible second-best way to reach fiscal sustainability. (iii) Citizens demand fewer public services and a sounder fiscal policy in systems with direct legislation than in purely parliamentary systems. (iv) There is some evidence that fiscal federalism leads  ceteris pari-bus  to a smaller size of the government. There are also political institutions which have an impact on the public budg-ets, and there are some interactions between the different institutions.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 617.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_617

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Keywords: balanced budget; budgetary procedures; fiscal federalism; direct democracy; public expenditure; public debt;

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Cited by:
  1. Lars Feld & Christoph Schaltegger, 2010. "Political stability and fiscal policy: time series evidence for the Swiss federal level since 1849," Public Choice, Springer, Springer, vol. 144(3), pages 505-534, September.
  2. Bruno S. Frey & Alois Stutzer, 2004. "The Role of Direct Democracy and Federalism in Local Power," CREMA Working Paper Series, Center for Research in Economics, Management and the Arts (CREMA) 2004-25, Center for Research in Economics, Management and the Arts (CREMA).
  3. Thomas A. Downes, 2002. "Do state governments matter?: a review of the evidence on the impact on educational outcomes of the changing role of the states in the financing of public education," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, vol. 47(Jun), pages 143-180.
  4. Mark Schelker & Reiner Eichenberger, 2003. "Starke Rechnungsprüfungskommissionen: Wichtiger als direkte Demokratie und Föderalismus? Ein erster Blick auf die Daten," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), Swiss Society of Economics and Statistics (SSES), vol. 139(III), pages 351-373, September.
  5. Blume, Lorenz & Voigt, Stefan, 2013. "The economic effects of constitutional budget institutions," European Journal of Political Economy, Elsevier, Elsevier, vol. 29(C), pages 236-251.
  6. Maria Manuel Pinho, 2004. "Political models of budget deficits: a literature review," FEP Working Papers 138, Universidade do Porto, Faculdade de Economia do Porto.
  7. Paul Hallwood & Ronald MacDonald, 2008. "A Review of the Empirical Evidence on the Effects of Fiscal Decentralization on Economic Efficiency: With Comments on Tax Devolution to Scotland," Working papers, University of Connecticut, Department of Economics 2008-46, University of Connecticut, Department of Economics.
  8. Jorge Ibarra Salazar & André Mollick, 2006. "Mexican northern border municipalities, financial dependence and institutions," The Annals of Regional Science, Springer, Springer, vol. 40(4), pages 859-874, December.

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