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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.

Suggested Citation

  • 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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    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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