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Political Bias in Fiscal Policy Formation: an Econometric Analysis of Coalition Systems

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  • Fabrizio Carmignani

    ()
    (Department of Economics, University of Milan-Bicocca and Department of Economics, University of Glasgow)

Abstract

This paper provides a comprehensive econometric analysis of some debated issues concerning the political and institutional determinants of fiscal policy outcomes. Several innovative results are obtained. It turns out that a significant effect on fiscal policy formation can be traced back to the ideological orientation of the policymaker, to the degree of cabinet instability, to cross-country differences in electoral and budgetary institutions and to the dispersion of political power within the ruling coalition. Instead, the preferences of the median voter appear to have little importance. The evidence also rejects the theory of fiscal illusion in decision-making.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper28.pdf
File Function: First version, 2000
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Bibliographic Info

Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 28.

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Length: 33 pages
Date of creation: Dec 2000
Date of revision: Dec 2000
Handle: RePEc:mib:wpaper:28

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Related research

Keywords: Fiscal Policy; Policy-making; deficit;

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  1. de Haan, Jakob & Sturm, Jan-Egbert & Beekhuis, Geert, 1999. " The Weak Government Thesis: Some New Evidence," Public Choice, Springer, vol. 101(3-4), pages 163-76, December.
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  7. Nouriel Roubini & Jeffrey Sachs, 1989. "Government Spending and Budget Deficits in the Industrial Economies," NBER Working Papers 2919, National Bureau of Economic Research, Inc.
  8. Mark Hallerberg & Jürgen von Hagen, 1999. "Electoral Institutions, Cabinet Negotiations, and Budget Deficits in the European Union," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 209-232 National Bureau of Economic Research, Inc.
  9. Torsten Persson & Guido Tabellini, 1997. "Political Economics and Macroeconomic Policy," NBER Working Papers 6329, National Bureau of Economic Research, Inc.
  10. Luisa Lambertini, 2003. "Are Budget Deficits Used Strategically?," Boston College Working Papers in Economics 578, Boston College Department of Economics.
  11. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-94, September.
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  13. Alesina, Alberto & Tabellini, Guido, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 403-14, July.
  14. William D. Nordhaus, 1989. "Alternative Approaches to the Political Business Cycle," Cowles Foundation Discussion Papers 927, Cowles Foundation for Research in Economics, Yale University.
  15. repec:fth:eeccco:96 is not listed on IDEAS
  16. Carmignani, Fabrizio, 2002. "New Evidence on the Politics and Economics of Multiparty Cabinets Duration," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(3), pages 249-79, August.
  17. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
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  19. Edin, Per-Anders & Ohlsson, Henry, 1991. "Political determinants of budget deficits: Coalition effects versus minority effects," European Economic Review, Elsevier, vol. 35(8), pages 1597-1603, December.
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  21. Robert E. Lucas Jr. & Nancy L. Stokey, 1982. "Optimal Fiscal and Monetary Policy in an Economy Without Capital," Discussion Papers 532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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Cited by:
  1. Fabrizio Carmignani, 2003. "Political Instability, Uncertainty and Economics," Journal of Economic Surveys, Wiley Blackwell, vol. 17(1), pages 1-54, February.
  2. Fabrizio Carmignani, 2001. "Theory and Evidence on the Political Economy of Growth," Working Papers 33, University of Milano-Bicocca, Department of Economics, revised Jan 2001.

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