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The Economic Effects of Constitutions: Do Budget Institutions Make Forms of Government More Alike?

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  • Scartascini, Carlos
  • Ardanaz, Martín

Abstract

According to an influential theoretical argument, presidential systems tend to present smaller governments because the separation between those who decide the size of the fiscal purse and those who allocate it creates incentives for lower public expenditures. In practice, forms of government vary greatly, and budget institutions -the rules according to which budgets are drafted, approved, and implemented- are one (of many) drivers of such variation. This paper argues that under more hierarchical budget rules, presidential and parliamentary systems generate a similar incentive structure for the executive branch in shaping the size of government. This hypothesis is tested on a broad cross-section of countries, presidentialism is found to have a negative impact on government size only when executive discretion in the budget process is low (that is, in a context of separation of powers). However, the negative effect of presidentialism on expenditures vanishes or is even reversed when the executive`s discretion over the budget process is higher. Hence, budget institutions that impose restrictions on the legislature`s ability to amend budget proposals can make political regimes look more alike in terms of fiscal outcomes.

Suggested Citation

  • Scartascini, Carlos & Ardanaz, Martín, 2013. "The Economic Effects of Constitutions: Do Budget Institutions Make Forms of Government More Alike?," IDB Publications (Working Papers) 4604, Inter-American Development Bank.
  • Handle: RePEc:idb:brikps:4604
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    Cited by:

    1. Asatryan, Zareh & Castellón, César & Stratmann, Thomas, 2018. "Balanced budget rules and fiscal outcomes: Evidence from historical constitutions," Journal of Public Economics, Elsevier, vol. 167(C), pages 105-119.
    2. Michela Cella & Giovanna Iannantuoni & Elena Manzoni, 2017. "Do the Right Thing: Incentives for Policy Selection in Presidential and Parliamentary Systems," Economica, London School of Economics and Political Science, vol. 84(335), pages 430-453, July.
    3. Bernard Steunenberg, 2021. "The politics within institutions for regulating public spending: conditional compliance within multi-year budgets," Constitutional Political Economy, Springer, vol. 32(1), pages 31-51, March.
    4. Luca Bettarelli & Michela Cella & Giovanna Iannantuoni & Elena Manzoni, 2021. "It’s a matter of confidence. Institutions, government stability and economic outcomes," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(2), pages 709-738, July.
    5. Pessino, Carola & Izquierdo, Alejandro & Vuletin, Guillermo, 2018. "Better Spending for Better Lives: How Latin America and the Caribbean Can Do More with Less," IDB Publications (Books), Inter-American Development Bank, number 9152.
    6. Mariano Tommasi & Germán Caruso & Carlos Scartascini, 2014. "Are We Playing the Same Game? The Economic Effects of Constitutions Depend on the Degree of Institutionalization," Working Papers 116, Universidad de San Andres, Departamento de Economia, revised Dec 2014.

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    More about this item

    Keywords

    IDB-WP-427;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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