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The Political Economy Of Budget Deficits

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  • LORI L. LEACHMAN
  • GUILLERMO ROSAS
  • PETER LANGE
  • ALAN BESTER

Abstract

In Leachman et al. (2005) we use the multicointegration approach to test for sustainable fiscal budgeting processes in a stochastic setting in 15 industrialized countries. In this paper, we extend the analysis in order to rank these same countries as well as an additional three, according to the degree to which their budget processes are sustainable. Rankings are related to theories regarding the political economy of budget deficits. Evidence clearly indicates that fiscal performance is better where fiscal budgeting institutions are strong. Additionally, we find that in conjunction with fiscal strength, greater degrees of federalism positively affect intertemporal budget management. Copyright 2007 Blackwell Publishing Ltd..

Suggested Citation

  • Lori L. Leachman & Guillermo Rosas & Peter Lange & Alan Bester, 2007. "The Political Economy Of Budget Deficits," Economics and Politics, Wiley Blackwell, vol. 19(3), pages 369-420, November.
  • Handle: RePEc:bla:ecopol:v:19:y:2007:i:3:p:369-420
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    References listed on IDEAS

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    1. Tanzi,Vito & Schuknecht,Ludger, 2000. "Public Spending in the 20th Century," Cambridge Books, Cambridge University Press, number 9780521662918, March.
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    3. Torsten Persson & Guido Tabellini, "undated". "Federal Fiscal Constitutions. Part I: Risk Sharing and Moral Hazard," EPRU Working Paper Series 93-04, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
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    6. Alberto Alesina & Roberto Perotti, 1994. "The Political Economy of Budget Deficits," NBER Working Papers 4637, National Bureau of Economic Research, Inc.
    7. James M. Poterba & Jürgen von Hagen, 1999. "Introduction to "Fiscal Institutions and Fiscal Performance"," NBER Chapters,in: Fiscal Institutions and Fiscal Performance, pages 1-12 National Bureau of Economic Research, Inc.
    8. Torsten Persson & Guido Tabellini, 2003. "Do Electoral Cycles Differ Across Political Systems?," Working Papers 232, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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    Cited by:

    1. Attiya Y. Javid & Umaima Arif & Asma Arif, 2011. "Economic, Political and Institutional Determinants of Budget Deficits Volatility in Selected Asian Countries," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 50(4), pages 649-662.
    2. Ringa Raudla, 2010. "Governing budgetary commons: what can we learn from Elinor Ostrom?," European Journal of Law and Economics, Springer, vol. 30(3), pages 201-221, December.
    3. Luca Agnello & Ricardo M. Sousa, 2009. "The Determinants of Public Deficit Volatility," NIPE Working Papers 11/2009, NIPE - Universidade do Minho.
    4. Cicatiello, Lorenzo & De Simone, Elina & Gaeta, Giuseppe Lucio, 2016. "Political determinants of fiscal transparency: a panel data empirical investigation," MPRA Paper 72609, University Library of Munich, Germany.
    5. Luca Agnello & Ricardo M. Sousa, 2013. "Political, Institutional, and Economic Factors Underlying Deficit Volatility," Review of International Economics, Wiley Blackwell, vol. 21(4), pages 719-732, September.
    6. Hyungon Kim & Chang Kwon, 2015. "The Effects of Fiscal Consolidation and Welfare Composition of Spending on Electoral Outcomes: Evidence from US Gubernatorial Elections between 1978 and 2006," New Political Economy, Taylor & Francis Journals, vol. 20(2), pages 228-253, April.
    7. Kapitsinis, Nikolaos & Metaxas, Theodore, 2011. "Economic crisis and the role of state policies in current globalized economy. The case of Greece," MPRA Paper 43650, University Library of Munich, Germany.
    8. Luca Agnello & Ricardo M. Sousa, 2014. "The Determinants of the Volatility of Fiscal Policy Discretion," Fiscal Studies, Institute for Fiscal Studies, vol. 35, pages 91-115, March.

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