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Electoral Institutions, Cabinet Negotiations, and Budget Deficits in the European Union

In: Fiscal Institutions and Fiscal Performance


  • Mark Hallerberg
  • Jürgen von Hagen


A rough consensus has emerged that states with proportional representation systems are" likely to run larger deficits than plurality states. We argue that electoral institutions matter because" they restrict the type of budgetary institution at the governmental phase which a state has at its" disposal. Cabinet members may willingly delegate authority to a finance minister who can monitor" spending ministers and punish those who defect' in a process we label delegation procedure is feasible in states where one-party governments are the norm. Such states usually have" plurality electoral systems. In multi-party governments, which are common in states with" proportional representation, the coalition members are not willing to delegate to one actor the ability" to monitor and punish the others. Negotiated targets in the form of fiscal contracts provide an" alternative in multi-party governments. Pooled time series regression results for the current" European Union states in the period 1981-94 support our contention that it is the presence or absence" of one of these budgetary institutions, rather than the plurality/proportional representation" dichotomy, which has the greatest impact on debt levels.
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Suggested Citation

  • Mark Hallerberg & Jürgen von Hagen, 1999. "Electoral Institutions, Cabinet Negotiations, and Budget Deficits in the European Union," NBER Chapters,in: Fiscal Institutions and Fiscal Performance, pages 209-232 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:8029

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    References listed on IDEAS

    1. Torsten Persson & Lars E. O. Svensson, 1989. "Why a Stubborn Conservative would Run a Deficit: Policy with Time-Inconsistent Preferences," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 325-345.
    2. von Hagen, Jurgen & Harden, Ian J., 1995. "Budget processes and commitment to fiscal discipline," European Economic Review, Elsevier, vol. 39(3-4), pages 771-779, April.
    3. repec:cup:apsrev:v:87:y:1993:i:02:p:455-464_10 is not listed on IDEAS
    4. Alesina, Alberto & Hausmann, Ricardo & Hommes, Rudolf & Stein, Ernesto, 1999. "Budget institutions and fiscal performance in Latin America," Journal of Development Economics, Elsevier, vol. 59(2), pages 253-273, August.
    5. de Haan, Jakob & Sturm, Jan-Egbert, 1997. "Political and economic determinants of OECD budget deficits and government expenditures: A reinvestigation," European Journal of Political Economy, Elsevier, vol. 13(4), pages 739-750, December.
    6. repec:cup:apsrev:v:90:y:1996:i:02:p:269-282_20 is not listed on IDEAS
    7. Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," American Economic Review, American Economic Association, vol. 80(1), pages 37-49, March.
    8. Weingast, Barry R & Shepsle, Kenneth A & Johnsen, Christopher, 1981. "The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 642-664, August.
    9. Edin, Per-Anders & Ohlsson, Henry, 1991. "Political determinants of budget deficits: Coalition effects versus minority effects," European Economic Review, Elsevier, vol. 35(8), pages 1597-1603, December.
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    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems


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