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Institutions promoting budgetary discipline: evidence from Swedish municipalities

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Author Info

  • Dietrichson, Jens

    ()
    (Department of Economics, Lund University)

  • Ellegård, Lina Maria

    ()
    (Department of Economics, Lund University)

Abstract

Conflicts of interest over fiscal sustainability between an organization's planning and implementing branches creates the need for institutions that align incentives and curb the bargaining power of the implementing branch. We examine this general public sector problem by collecting unique data on budget institutions and fiscal preferences in the Swedish municipalities. Our results support the notion that the interaction between institutions and preferences is important, as the estimated correlations de- pend on the reported strength of conflicts. Centralization of the budget process, a credible threat of replacement of managers following systematic deficits, and surplus carry-over rules all appear beneficial to net revenues, but only in municipalities that report substantial conflicts of interest. For municipalities where the conflict is small, a deficit carry-over rule is positively correlated to net revenues. It remains to be ex- plored whether the carry-over rules are important also in the absence of a centralized budget process, as fiscally successful municipalities to a large extent employ both centralized budget processes and carry-over rules.

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Bibliographic Info

Paper provided by Lund University, Department of Economics in its series Working Papers with number 2011:8.

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Length: 44 pages
Date of creation: 31 Jan 2011
Date of revision: 20 Dec 2012
Publication status: Forthcoming as Dietrichson, Jens and Lina Maria Ellegård, 'Institutions promoting budgetary discipline: evidence from Swedish municipalities' in International Tax and Public Finance.
Handle: RePEc:hhs:lunewp:2011_008

Contact details of provider:
Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en
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Keywords: budget institutions; public organizations; municipalities; deficit/surplus;

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References

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Citations

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Cited by:
  1. Ellegård, Lina Maria, 2013. "Divided We Fall. Conflicts of Interests Regarding Fiscal Discipline in Municipal Hierarchies," Working Papers, Lund University, Department of Economics 2013:42, Lund University, Department of Economics.
  2. Jens Dietrichson & Lina Maria Ellegård, 2013. "Assist or desist? Conditional bailouts and fiscal discipline in local governments," ERSA conference papers ersa13p598, European Regional Science Association.

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