Political Economy of Fiscal Institutions
AbstractWe discuss two essential problems of the political economy of public finances: The principal agent problem between voters and elected politicians and the common pool problem arising from the fact that money drawn from a general tax fund is used to pay for policies targeting more or less narrow groups in society. Three institutional mechanisms exist to deal with these problems, ex-ante rules controlling the behavior of elected policy makers, electoral rules creating accountability of and competition among policy makers, and budgeting processes internalizing the common pool externality. We review recent theoretical and empirical research and discuss its implications for research and institutional design.
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Bibliographic InfoPaper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 149.
Date of creation: Nov 2005
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electoral systems; fiscal rules; budgeting processes;
Find related papers by JEL classification:
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-15 (All new papers)
- NEP-CBA-2006-07-15 (Central Banking)
- NEP-CDM-2006-07-15 (Collective Decision-Making)
- NEP-PBE-2006-07-15 (Public Economics)
- NEP-PKE-2006-07-15 (Post Keynesian Economics)
- NEP-POL-2006-07-15 (Positive Political Economics)
- NEP-PUB-2006-07-15 (Public Finance)
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