Institutions promoting budgetary discipline: evidence from Swedish municipalities
AbstractConflicts 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 InfoPaper provided by Lund University, Department of Economics in its series Working Papers with number 2011:8.
Length: 44 pages
Date of creation: 31 Jan 2011
Date of revision: 20 Dec 2012
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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
More information through EDIRC
budget institutions; public organizations; municipalities; deficit/surplus;
Find related papers by JEL classification:
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
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