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Political Institutions and Policy Outcomes: What are the Stylized Facts?

  • Torsten Persson

    (IIES, Stockholm University)

  • Guido Tabellini

    (IGIER, Universita' Bocconi)

We investigate the effect of electoral rules and political regimes on fiscal policy outcomes in a panel of 61 democracies from 1960 and onwards. In presidential regimes, the size of government is smaller and less responsive to income shocks, compared to parliamentary regimes. Under majoritarian elections, social transfers are smaller and aggregate spending less responsive to to income shocks than under proportional elections. Institutions also shape electoral cycles; only in presidential regimes is fiscal adjustment delayed until after the elections, and only in proportional and parliamentary systems do social transfers expand around elections. Several of these empirical regularities are in line with recent theoretical work; others are still awaiting a theoretical explanation.

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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 412.

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Date of creation: Aug 2001
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Handle: RePEc:bdi:wptemi:td_412_01
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  1. Torsten Persson & Gerard Roland & Guido Tabellini, . "Separation of Powers and Political Accountability," Working Papers 100, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. David Austen-Smith, 2000. "Redistributing Income under Proportional Representation," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1235-1269, December.
  3. Torsten Persson & Guido Tabellini, 1997. "Political Economics and Macroeconomic Policy," NBER Working Papers 6329, National Bureau of Economic Research, Inc.
  4. Michael Gavin & Roberto Perotti, 1997. "Fiscal Policy in Latin America," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 11-72 National Bureau of Economic Research, Inc.
  5. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
  6. Alessro Lizzeri & Nicola Persico, . "The Provision of Public Goods Under Alternative Electoral Incentives," Penn CARESS Working Papers b96440ba0bfa06ca550ac40aa, Penn Economics Department.
  7. Riccardo De Bonis & Annalisa Ferrando, 2000. "The multimarket contacts theory; an application to Italian banks," Temi di discussione (Economic working papers) 387, Bank of Italy, Economic Research and International Relations Area.
  8. repec:cup:cbooks:9780521662918 is not listed on IDEAS
  9. Persson, Torsten & Tabellini, Guido & Trebbi, Francesco, 2001. "Electoral Rules and Corruption," CEPR Discussion Papers 2741, C.E.P.R. Discussion Papers.
  10. Henning Bohn & Robert P. Inman, . "Balanced Budget Rules and Public Deficits: Evidence from the U.S. States (Reprint 060)," Rodney L. White Center for Financial Research Working Papers 10-96, Wharton School Rodney L. White Center for Financial Research.
  11. Torsten Persson & Gerard Roland & Guido Tabellini, . "Comparative Politics and Public Finance," Working Papers 114, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  12. Alberto Alesina & Nouriel Roubini & Gerald D. Cohen, 1997. "Political Cycles and the Macroeconomy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510944, June.
  13. Lars P. Feld & John G. Matsusaka, 2000. "Budget Referendums and Government Spending: Evidence from Swiss," CESifo Working Paper Series 323, CESifo Group Munich.
  14. Pommerehne, Werner W., 1990. "The empirical relevance of comparative institutional analysis," European Economic Review, Elsevier, vol. 34(2-3), pages 458-469, May.
  15. Alesina, A. & Drazen, A., 1991. "Why Are Stabilizations Delayed?," Papers 6-91, Tel Aviv - the Sackler Institute of Economic Studies.
  16. Nouriel Roubini & Jeffrey Sachs, 1988. "Political and Economic Determinants of Budget Deficits in the IndustrialDemocracies," NBER Working Papers 2682, National Bureau of Economic Research, Inc.
  17. Mark Hallerberg & Jurgen von Hagen, 1997. "Electoral Institutions, Cabinet Negotiations, and Budget Deficits in the European Union," NBER Working Papers 6341, National Bureau of Economic Research, Inc.
  18. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  19. James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1, August.
  20. Barro, Robert J., 1999. "Determinants of Democracy," Scholarly Articles 3451297, Harvard University Department of Economics.
  21. repec:cup:cbooks:9780521664103 is not listed on IDEAS
  22. Alesina, Alberto & Tabellini, Guido, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 403-14, July.
  23. Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
  24. Boozer, Michael A., 1997. "Econometric Analysis of Panel Data Badi H. Baltagi Wiley, 1995," Econometric Theory, Cambridge University Press, vol. 13(05), pages 747-754, October.
  25. Henning Bohn & Robert P. Inman, 1996. "Balanced Budget Rules and Public Deficits: Evidence from the U.S. States," NBER Working Papers 5533, National Bureau of Economic Research, Inc.
  26. Yianos Kontopoulos & Roberto Perotti, 1999. "Government Fragmentation and Fiscal Policy Outcomes: Evidence from OECD Countries," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 81-102 National Bureau of Economic Research, Inc.
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