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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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Bibliographic Info

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. 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, vol. 47(Jun), pages 143-180.
  2. 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), vol. 139(III), pages 351-373, September.
  3. Blume, Lorenz & Voigt, Stefan, 2013. "The economic effects of constitutional budget institutions," European Journal of Political Economy, Elsevier, vol. 29(C), pages 236-251.
  4. Lars P. Feld & Christoph A. Schaltegger, 2009. "Political Stability and Fiscal Policy - Time Series Evidence for the Swiss Federal Level since 1849," CESifo Working Paper Series 2691, CESifo Group Munich.
  5. Bruno S. Frey & Alois Stutzer, 2004. "The Role of Direct Democracy and Federalism in Local Power," CREMA Working Paper Series 2004-25, Center for Research in Economics, Management and the Arts (CREMA).
  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 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, vol. 40(4), pages 859-874, December.

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