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Fiscal Rules and Government Size in the European Union

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  • Jochen O. Mierau
  • Eduard Suari Andreu

Abstract

This paper studies the impact of national fiscal rules on government size as measured by the ratio of government expenditures to gross domestic product. We develop a model of the budgetary process and show that a common pool problem may arise which can be mitigated through fiscal rules. We test the model’s predictions using a novel time-series cross-section dataset of 27 European Union members for the period between 1990 and 2011. Corroborating the model, we find that fiscal rules have a negative impact on government size. Contrasting the model, their impact becomes smaller as the number of ministers increases.

Suggested Citation

  • Jochen O. Mierau & Eduard Suari Andreu, 2014. "Fiscal Rules and Government Size in the European Union," CESifo Working Paper Series 4693, CESifo.
    • Handle: RePEc:ces:ceswps:_4693
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    More about this item

    Keywords

    political fragmentation; fiscal rules; government size;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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