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Do budgetary institutions mitigate the common pool problem? New empirical evidence for the EU

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  • Jakob Haan
  • Richard Jong-A-Pin

    ()

  • Jochen Mierau

Abstract

We analyze how budgetary institutions affect government budget deficits in member states of the European Union during 1984–2003 employing new indicators provided by Hallerberg et al. ( 2009 ). Using panel fixed effects models, we examine whether the impact of budgetary institutions on budget deficits is conditioned by political fragmentation (i.e., ideological differences among parties in government) and size fragmentation (i.e., the effective number of parties in government or the number of spending ministers). Our results suggest that strong budgetary institutions, no matter whether they are based on delegation to a strong minister of finance or on fiscal contracts, reduce the deficit bias in case of strong ideological fragmentation. In contrast, the impact of budgetary institutions is not conditioned by size fragmentation. Copyright The Author(s) 2013

Suggested Citation

  • Jakob Haan & Richard Jong-A-Pin & Jochen Mierau, 2013. "Do budgetary institutions mitigate the common pool problem? New empirical evidence for the EU," Public Choice, Springer, vol. 156(3), pages 423-441, September.
  • Handle: RePEc:kap:pubcho:v:156:y:2013:i:3:p:423-441
    DOI: 10.1007/s11127-012-9949-5
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    References listed on IDEAS

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    Cited by:

    1. Momi Dahan & Michel Strawczynski, 2016. "Budget Institutions and Government Effectiveness," CESifo Working Paper Series 6219, CESifo Group Munich.
    2. repec:dgr:rugsom:14009-eef is not listed on IDEAS
    3. Barry Eichengreen & Ugo Panizza, 2016. "A surplus of ambition: can Europe rely on large primary surpluses to solve its debt problem?," Economic Policy, CEPR;CES;MSH, vol. 31(85), pages 5-49.
    4. Mohamed Zaky & Sarah El khishin, 2016. "Fiscal Governance in Egypt: Strengthening Budgetary Institutions to Counteract Political Fragmentation," Working Papers 1027, Economic Research Forum, revised Jul 2016.
    5. Niklas Potrafke & Marina Riem & Christoph Schinke, 2016. "Debt Brakes in the German States: Governments’ Rhetoric and Actions," German Economic Review, Verein für Socialpolitik, vol. 17(2), pages 253-275, May.
    6. Dilla, Diana, 2017. "Staatsverschuldung und Verschuldungsmentalität
      [Public Debt and Debt Mentality]
      ," MPRA Paper 79432, University Library of Munich, Germany.
    7. repec:cup:jinsec:v:13:y:2017:i:03:p:575-598_00 is not listed on IDEAS
    8. Leibrecht, Markus & Pitlik, Hans, 2015. "Social trust, institutional and political constraints on the executive and deregulation of markets," European Journal of Political Economy, Elsevier, vol. 39(C), pages 249-268.
    9. Markus Leibrecht & Hans Pitlik, 2014. "Generalised Trust, Institutional and Political Constraints on the Executive and Deregulation of Markets," WIFO Working Papers 481, WIFO.
    10. Jochen O. Mierau & Eduard Suari Andreu, 2014. "Fiscal Rules and Government Size in the European Union," CESifo Working Paper Series 4693, CESifo Group Munich.
    11. Konstantinos Konstantakis & Theofanis Papageorgiou & Panayotis Michaelides & Efthymios Tsionas, 2015. "Economic Fluctuations and Fiscal Policy in Europe: A Political Business Cycles Approach Using Panel Data and Clustering (1996–2013)," Open Economies Review, Springer, vol. 26(5), pages 971-998, November.
    12. Hanna Bäck & Wolfgang C. Müller & Benjamin Nyblade, 2017. "Multiparty government and economic policy-making," Public Choice, Springer, vol. 170(1), pages 33-62, January.
    13. Marc-Daniel Moessinger, 2014. "Do the personal characteristics of finance ministers affect changes in public debt?," Public Choice, Springer, vol. 161(1), pages 183-207, October.
    14. repec:agr:journl:v:xxiv:y:2017:i:2(611):p:111-130 is not listed on IDEAS
    15. Pitlik, Hans & Rode, Martin, 2017. "Individualistic values, institutional trust, and interventionist attitudes," Journal of Institutional Economics, Cambridge University Press, vol. 13(03), pages 575-598, September.
    16. Reuter, Wolf Heinrich, 2015. "National numerical fiscal rules: Not complied with, but still effective?," European Journal of Political Economy, Elsevier, vol. 39(C), pages 67-81.
    17. Joseph David Barroso Vasconcelos de Deus & Helder Ferreira de Mendonça, 2015. "Empirical evidence on fiscal forecasting in Eurozone countries," Journal of Economic Studies, Emerald Group Publishing, vol. 42(5), pages 838-860, October.
    18. Bergman, U. Michael & Hutchison, Michael M. & Jensen, Svend E. Hougaard, 2016. "Promoting sustainable public finances in the European Union: The role of fiscal rules and government efficiency," European Journal of Political Economy, Elsevier, vol. 44(C), pages 1-19.
    19. Bäck, Hanna & Lindvall, Johannes, 2015. "Commitment Problems in Coalitions: A New Look at the Fiscal Policies Of Multiparty Governments," Political Science Research and Methods, Cambridge University Press, vol. 3(01), pages 53-72, January.

    More about this item

    Keywords

    Budgetary institutions; Fiscal policy; Political fragmentation; Size fragmentation; H62;

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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