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The economic effects of constitutional budget institutions

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  • Blume, Lorenz
  • Voigt, Stefan

Abstract

There is a well-established literature analyzing the effects of fiscal institutions on fiscal policy variables such as budget deficits or accumulated government debt. We combine this literature with the emerging field of positive constitutional economics, which deals with the economic effects of constitutional rules. The paper addresses three questions: (1) Do budget provisions that are explicitly spelled out in a country's constitution have any significant effect on fiscal policy? (2) Does the transparency, or lack thereof, of the budget process have any significant effect on fiscal policy? and (3) Do these two variables have an impact on other variables such as government effectiveness and productivity? We find that constitutionally entrenched spending limits are correlated with lower total government expenditure and that the transparency of a nation's budget is correlated with higher government effectiveness as well as lower corruption. If anything, the deficit limits entrenched in the Maastricht Treaty are correlated with higher, rather than lower, overall government expenditure.

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  • Blume, Lorenz & Voigt, Stefan, 2013. "The economic effects of constitutional budget institutions," European Journal of Political Economy, Elsevier, vol. 29(C), pages 236-251.
  • Handle: RePEc:eee:poleco:v:29:y:2013:i:c:p:236-251
    DOI: 10.1016/j.ejpoleco.2012.10.004
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    Cited by:

    1. Chatagny, Florian, 2015. "Incentive effects of fiscal rules on the finance minister's behavior: Evidence from revenue projections in Swiss Cantons," European Journal of Political Economy, Elsevier, vol. 39(C), pages 184-200.
    2. Voigt, Stefan, 2020. "Mind the Gap – Analyzing the Divergence between Constitutional Text and Constitutional Reality," ILE Working Paper Series 32, University of Hamburg, Institute of Law and Economics.
    3. Bernard Steunenberg, 2021. "The politics within institutions for regulating public spending: conditional compliance within multi-year budgets," Constitutional Political Economy, Springer, vol. 32(1), pages 31-51, March.
    4. Sacchi, Agnese & Salotti, Simone, 2015. "The impact of national fiscal rules on the stabilisation function of fiscal policy," European Journal of Political Economy, Elsevier, vol. 37(C), pages 1-20.
    5. Heiko T. Burret & Lars P. Feld, 2018. "Vertical effects of fiscal rules: the Swiss experience," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(3), pages 673-721, June.
    6. Christofzik, Désirée I., 2019. "Does accrual accounting alter fiscal policy decisions? - Evidence from Germany," European Journal of Political Economy, Elsevier, vol. 60(C).
    7. Asatryan, Zareh & Castellón, César & Stratmann, Thomas, 2018. "Balanced budget rules and fiscal outcomes: Evidence from historical constitutions," Journal of Public Economics, Elsevier, vol. 167(C), pages 105-119.
    8. Iara, Anna & Wolff, Guntram B., 2014. "Rules and risk in the Euro area," European Journal of Political Economy, Elsevier, vol. 34(C), pages 222-236.
    9. Hansen, Daniel, 2020. "The effectiveness of fiscal institutions: International financial flogging or domestic constraint?," European Journal of Political Economy, Elsevier, vol. 63(C).
    10. Florian Dorn & Stefanie Gaebler & Felix Roesel, 2021. "Ineffective fiscal rules? The effect of public sector accounting standards on budgets, efficiency, and accountability," Public Choice, Springer, vol. 186(3), pages 387-412, March.
    11. Lunder, Trond Erik, 2016. "Between centralized and decentralized welfare policy: Have national guidelines constrained the influence of local preferences?," European Journal of Political Economy, Elsevier, vol. 41(C), pages 1-13.
    12. Peat, Maurice & Svec, Jiri & Wang, Jue, 2015. "The effects of fiscal opacity on sovereign credit spreads," Emerging Markets Review, Elsevier, vol. 24(C), pages 34-45.
    13. Martin Ardanaz & Carlos Scartascini, 2014. "The economic effects of constitutions: do budget institutions make forms of government more alike?," Constitutional Political Economy, Springer, vol. 25(3), pages 301-329, September.
    14. Burret, Heiko T. & Feld, Lars P., 2018. "(Un-)intended effects of fiscal rules," European Journal of Political Economy, Elsevier, vol. 52(C), pages 166-191.
    15. Montes, Gabriel Caldas & da Cunha Lima, Luiza Leitão, 2018. "Effects of fiscal transparency on inflation and inflation expectations: Empirical evidence from developed and developing countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 70(C), pages 26-37.
    16. Jochimsen, Beate & Thomasius, Sebastian, 2014. "The perfect finance minister: Whom to appoint as finance minister to balance the budget," European Journal of Political Economy, Elsevier, vol. 34(C), pages 390-408.
    17. Jan Fałkowski & Katarzyna Metelska-Szaniawska, 2015. "Przyczyny ustanawiania i stabilność konstytucji państwa - perspektywa ekonomiczna," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 79-105.
    18. Gabriel Caldas Montes & Paulo Henrique Luna, 2021. "Fiscal transparency, legal system and perception of the control on corruption: empirical evidence from panel data," Empirical Economics, Springer, vol. 60(4), pages 2005-2037, April.
    19. Francesco Pasimeni & Paolo Pasimeni, 2016. "An Institutional Analysis of the Europe 2020 Strategy," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 127(3), pages 1021-1038, July.
    20. de Renzio, Paolo & Wehner, Joachim, 2017. "The impacts of fiscal openness," LSE Research Online Documents on Economics 82521, London School of Economics and Political Science, LSE Library.
    21. Hauck, Achim & Vollmer, Uwe, 2013. "Emergency liquidity provision to public banks: Rules versus discretion," European Journal of Political Economy, Elsevier, vol. 32(C), pages 193-204.
    22. Cammeraat Emile, 2021. "The Effect of Constitutional Commitment to Social Security on Social Expenditure Schemes," Review of Law & Economics, De Gruyter, vol. 17(1), pages 193-222, March.
    23. Montes, Gabriel Caldas & Bastos, Júlio Cesar Albuquerque & de Oliveira, Ana Jordânia, 2019. "Fiscal transparency, government effectiveness and government spending efficiency: Some international evidence based on panel data approach," Economic Modelling, Elsevier, vol. 79(C), pages 211-225.
    24. Heiko T. Burret & Lars P. Feld, 2016. "Effects of Fiscal Rules - 85 Years' Experience in Switzerland," CESifo Working Paper Series 6063, CESifo.

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    More about this item

    Keywords

    Fiscal policy; Deficit; Constitutional debt rules; Transparency of budget; Positive constitutional economics;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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