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Politics, Government Size, and Fiscal Adjustment in Industrial Countries

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  • Anthony M Annett

Abstract

It is now well established that political and institutional factors matter for fiscal outcomes. Following a review of the literature, this paper examines the relationship between a variety of political-institutional variables and fiscal aggregates-encompassing the overall balance as well as expenditure and revenue and their various components-across 19 industrial countries over the past two decades. It finds strong effects on fiscal policy from such factors as type of electoral system, degree of legislative or government fragmentation, and stability of government. Some of the strongest results emerge for certain components of expenditure, such as transfers, and for the balance between labor and consumption taxation. There are clear relationships between the type of political system and choice of tax and expenditure system. The paper also examines fiscal adjustment since the late 1980s in light of these political factors, finding some evidence of a reversal in trend, but only when growth has been high or when debt has become problematic.

Suggested Citation

  • Anthony M Annett, 2002. "Politics, Government Size, and Fiscal Adjustment in Industrial Countries," IMF Working Papers 02/162, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:02/162
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    Cited by:

    1. Gnangnon, Sèna Kimm, 2014. "The Effect of Development Aid Unpredictability and Migrants’ Remittances on Fiscal Consolidation in Developing Countries," World Development, Elsevier, vol. 54(C), pages 168-190.
    2. Anthony M Annett, 2007. "Toward a Robust Fiscal Framework for Iceland; Motivation and Practical Suggestions," IMF Working Papers 07/235, International Monetary Fund.
    3. Anthony M Annett, 2006. "Enforcement and the Stability and Growth Pact; How Fiscal Policy Did and Did Not Change Under Europe’s Fiscal Framework," IMF Working Papers 06/116, International Monetary Fund.
    4. Sena Kimm GNANGNON, 2012. "The Effect of Development Aid Unpredictability and Migrants’ Remittances on Fiscal Consolidation in Developing Countries," Working Papers 201210, CERDI.
    5. Robert Lavigne, 2006. "The Institutional and Political Determinants of Fiscal Adjustment," Staff Working Papers 06-1, Bank of Canada.
    6. Lavigne, Robert, 2011. "The political and institutional determinants of fiscal adjustment: Entering and exiting fiscal distress," European Journal of Political Economy, Elsevier, vol. 27(1), pages 17-35, March.
    7. repec:agr:journl:v:xxiv:y:2017:i:2(611):p:111-130 is not listed on IDEAS
    8. Sèna Kimm Gnangnon, 2012. "The Effect of Development Aid Unpredictability and Migrants' Remittances on Fiscal Consolidation in Developing Countries," Working Papers halshs-00677108, HAL.

    More about this item

    Keywords

    Fiscal policy; Political economy; expenditure; taxation; fiscal adjustment; total expenditure; National Budget; Deficit; and Debt: General;

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