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The political economy of the German Länder deficits

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  • Jochimsen, Beate
  • Nuscheler, Robert

Abstract

We analyze the deficits of the German Länder for the period from 1960 to 2005 and test a number of hypotheses derived from the literature on the political economy of public deficits. Estimating a dynamic panel data model, we find evidence for political opportunism in the spirit of Rogoff and Sibert: German voters seem to favor fiscal discipline as debt issue is significantly lower in preelection years. As suggested by the theory, coalition governments issue significantly more debt than single party governments. There is no evidence for partisan behavior; party ideology plays a negligible role. Strategic debt issue may occur when the probability of reelection is small. Our results suggest that this kind of political instability has no impact on debt issue. -- Wir analysieren die Entwicklung der Budgetdefizite in den deutschen Bundesländern von 1960 bis 2005 und testen eine Reihe von Hypothesen, die sich aus der politökonomischen Literatur öffentlicher Defizite ableiten lassen. Im Rahmen eines dynamischen Panel-Modells finden wir Evidenz für politischen Opportunismus im Sinne von Rogoff und Sibert: Deutsche Wähler scheinen fiskalische Disziplin zu befürworten, da die Verschuldung in Vorwahljahren signifikant weniger ansteigt als in anderen Jahren. Wie die Theorie nahe legt, wächst die Verschuldung bei Koalitionsregierungen signifikant mehr als bei Alleinregierungen. Wir finden hingegen keine Belege für Partisanenverhalten, Parteiideologien spielen also eine zu vernachlässigende Rolle. Strategische Neuverschuldung könnte erfolgen, wenn die Wiederwahlwahrscheinlichkeit gering ist. Unsere Ergebnisse lassen jedoch erkennen, dass diese Art der politischen Instabilität keinen Einfluss auf die Neuverschuldung hat.

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Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Market Processes and Governance with number SP II 2007-06.

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Date of creation: 2007
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Handle: RePEc:zbw:wzbmpg:spii200706

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Keywords: Public Deficit; German Länder; Political Economy; Dynamic Panel; Data Model;

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Citations

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Cited by:
  1. Troeger, Vera & Schneider, Christina J., 2012. "Strategic Budgeteering and Debt Allocation," CAGE Online Working Paper Series 84, Competitive Advantage in the Global Economy (CAGE).
  2. Moessinger, Marc-Daniel, 2012. "Do personal characteristics of finance ministers affect the development of public debt?," ZEW Discussion Papers 12-068, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Ulrich Oberndorfer & Viktor Steiner, 2007. "Generationen- oder Parteienkonflikt? Eine empirische Analyse der deutschen Hochschulausgaben," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(2), pages 165-183, 03.
  4. Lars P. Feld, 2010. "Sinnhaftigkeit und Effektivität der deutschen Schuldenbremse," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(3), pages 226-245, 08.
  5. Helge Berger & Anika Holler, 2007. "What Determines Fiscal Policy? Evidence from German States," CESifo Working Paper Series 2062, CESifo Group Munich.
  6. Bernd Hayo & Florian Neumeier, 2012. "Leaders’ Impact on Public Spending Priorities: The Case of the German Laender," Kyklos, Wiley Blackwell, vol. 65(4), pages 480-511, November.
  7. Oberndorfer, Ulrich & Steiner, Viktor, 2006. "Intergenerational Conflict, Partisan Politics, and Public Higher Education Spending: Evidence from the German States," IZA Discussion Papers 2417, Institute for the Study of Labor (IZA).
  8. John Ashworth & Benny Geys & Bruno Heyndels, 2005. "Government Weakness and Local Public Debt Development in Flemish Municipalities," International Tax and Public Finance, Springer, vol. 12(4), pages 395-422, August.
  9. Fay Dunkerley & Amihai Glazer & Stef Proost, 2010. "What Drives Gasoline Prices?," Working Papers 091005, University of California-Irvine, Department of Economics.
  10. Bönke, Timm & Jochimsen, Beate & Schröder, Carsten, 2011. "Fiscal equalization and regions' (un)willingness-to-tax: Evidence from Germany," Economics Working Papers 2011,06, Christian-Albrechts-University of Kiel, Department of Economics.
  11. Sabine Freye, 2009. "Zum Zusammenhang zwischen der Verschuldung der Bundesländer und ihren finanziellen Handlungsspielräumen," IWH Discussion Papers 12, Halle Institute for Economic Research.
  12. Ulrich Oberndorfer & Viktor Steiner, 2006. "Generationen- oder Parteienkonflikt?: Eine empirische Analyse der deutschen Hochschulausgaben," Discussion Papers of DIW Berlin 603, DIW Berlin, German Institute for Economic Research.
  13. Beate R. Jochimsen & Sebastian Thomasius, 2012. "The Perfect Finance Minister: Whom to Appoint as Finance Minister to Balance the Budget?," Discussion Papers of DIW Berlin 1188, DIW Berlin, German Institute for Economic Research.
  14. Niklas Potrafke, 2011. "Public Expenditures on Education and Cultural Affairs in the West German States: Does Government Ideology Influence the Budget Composition?," German Economic Review, Verein für Socialpolitik, vol. 12(1), pages 124-145, 02.
  15. Niklas Potrafke, 2006. "Parties Matter in Allocating Expenditures: Evidence from Germany," Discussion Papers of DIW Berlin 652, DIW Berlin, German Institute for Economic Research.

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