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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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    More about this item

    Keywords

    Budgetary institutions; Fiscal policy; Political fragmentation; Size fragmentation; H62;
    All these keywords.

    JEL classification:

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

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