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The economic effects of constitutions: do budget institutions make forms of government more alike?

Listed author(s):
  • Martin Ardanaz

    ()

  • Carlos Scartascini

    ()

According to an influential theoretical argument, presidential systems tend to present smaller governments relative to parliamentary countries because the separation between those who decide the size of the fiscal purse and those who allocate it creates incentives for lower public expenditures. In practice, however, presidential and parliamentary countries come in many forms. In particular, variation in procedural rules that assign budget prerogatives across the popular branches of government may affect the underlying incentives that differentiate these types of regimes in terms of fiscal outcomes. More specifically, we argue that more hierarchical rules that concentrate budgetary power in the executive relative to the legislature do not only reduce the extent of the common pool problem but also limit the degree of separation of powers, which may have a countervailing effect. Consequently, the effect of the form of government on public expenditures is conditional on specific procedural rules. We test this hypothesis on a broad cross-section of countries and find that presidentialism has a negative impact on government size only when executive discretion in the budget process is low (that is, in a context of separation of powers). However, the negative effect of presidentialism on expenditures vanishes when the executive’s discretion over the budget process is higher. This result, in addition to highlighting that not all budget institutions have the same effect on incentives and outcomes, points out how important it is to go beyond broad characterizations of political institutions for explaining policy outcomes, and more generally, for moving forward the research agenda in constitutional political economy. Copyright Springer Science+Business Media New York 2014

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File URL: http://hdl.handle.net/10.1007/s10602-014-9166-y
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Article provided by Springer in its journal Constitutional Political Economy.

Volume (Year): 25 (2014)
Issue (Month): 3 (September)
Pages: 301-329

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Handle: RePEc:kap:copoec:v:25:y:2014:i:3:p:301-329
DOI: 10.1007/s10602-014-9166-y
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/political+science/journal/10602/PS2

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  1. Arturo Galindo & Carlos Scartascini & J. Mark Payne & Robert Daughters & Alberto Melo & Koldo Echebarría & Eduardo Lora & Gabriel Filc & Alejandro Micco & Alberto E. Chong & Ugo Panizza & Juan Benavid, 2007. "The State of State Reform in Latin America," IDB Publications (Books), Inter-American Development Bank, number 59578 edited by Eduardo Lora, February.
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  9. Eduardo Lora, 2007. "The State of State Reform in Latin America," World Bank Publications, The World Bank, number 6642, December.
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  18. Daron Acemoglu, 2005. "Constitutions, Politics and Economics: A Review Essay on Persson and Tabellini's "The Economic Effect of Constitutions"," NBER Working Papers 11235, National Bureau of Economic Research, Inc.
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