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The Causes of Fiscal Transparency: Evidence from the American States

Author

Listed:
  • James E. Alt

    (Department of Government, Harvard University)

  • David Dreyer Lassen

    (Department of Economics, University of Copenhagen)

  • Shanna Rose

    (Department of Political Science, State University of New York (SUNY) - Stony Brook)

Abstract

We use unique panel data on the evolution of transparent budget procedures in the American states over the past three decades to explore the political and economic determinants of fiscal transparency. Our case studies and quantitative analysis suggest that both politics and fiscal policy outcomes influence the level of transparency. More equal political competition and power sharing are associated with both greater levels of fiscal transparency and increases in fiscal transparency during the sample period. Political polarization and past fiscal conditions, in particular state government debt and budget imbalance, also appear to affect the level of transparency.

Suggested Citation

  • James E. Alt & David Dreyer Lassen & Shanna Rose, 2006. "The Causes of Fiscal Transparency: Evidence from the American States," EPRU Working Paper Series 06-02, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:epruwp:06-02
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    File URL: http://www.econ.ku.dk/eprn_epru/Workings_Papers/wp-06-02.pdf
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    References listed on IDEAS

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    1. Timothy Besley & Anne Case, 2003. "Political Institutions and Policy Choices: Evidence from the United States," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 7-73, March.
    2. Andrea Prat, 2005. "The Wrong Kind of Transparency," American Economic Review, American Economic Association, vol. 95(3), pages 862-877, June.
    3. Milesi-Ferretti, Gian Maria, 2004. "Good, bad or ugly? On the effects of fiscal rules with creative accounting," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 377-394, January.
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    6. R. Gaston Gelos & Shang-Jin Wei, 2005. "Transparency and International Portfolio Holdings," Journal of Finance, American Finance Association, vol. 60(6), pages 2987-3020, December.
    7. Alesina, Alberto & Perotti, Roberto, 1996. "Fiscal Discipline and the Budget Process," American Economic Review, American Economic Association, vol. 86(2), pages 401-407, May.
    8. Murray Petrie, 2003. "Promoting Fiscal Transparency the Complementary Roles of the Imf, Financial Markets and Civil Society," IMF Working Papers 03/199, International Monetary Fund.
    9. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November.
    10. Alessandro Gavazza & Alessandro Lizzeri, 2009. "Transparency and Economic Policy," Review of Economic Studies, Oxford University Press, vol. 76(3), pages 1023-1048.
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    13. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
    14. F. Andrew Hanssen, 2004. "Is There a Politically Optimal Level of Judicial Independence?," American Economic Review, American Economic Association, vol. 94(3), pages 712-729, June.
    15. George Kopits & J. D. Craig, 1998. "Transparency in Government Operations," IMF Occasional Papers 158, International Monetary Fund.
    16. Robert Barro, 1973. "The control of politicians: An economic model," Public Choice, Springer, vol. 14(1), pages 19-42, March.
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    Citations

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    Cited by:

    1. Eiji Yamamura & Haruo Kondoh, 2013. "Government Transparency And Expenditure In The Rent-Seeking Industry: The Case Of Japan For 1998–2004," Contemporary Economic Policy, Western Economic Association International, vol. 31(3), pages 635-647, July.
    2. Beetsma, Roel & Debrun, Xavier & Sloof, Randolph, 2017. "The political economy of fiscal transparency and independent fiscal councils," CEPR Discussion Papers 12181, C.E.P.R. Discussion Papers.
    3. Mark Schelker, 2011. "Lame Ducks and Divided Government: How Voters Control the Unaccountable," CESifo Working Paper Series 3523, CESifo Group Munich.
    4. Alt, James & Lassen, David Dreyer & Wehner, Joachim, 2014. "It isn't just about Greece: domestic politics, transparency and fiscal gimmickry in Europe," LSE Research Online Documents on Economics 57639, London School of Economics and Political Science, LSE Library.
    5. Timothy C. Irwin, 2015. "Defining The Government'S Debt And Deficit," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 711-732, September.
    6. Cicatiello, Lorenzo & De Simone, Elina & Gaeta, Giuseppe Lucio, 2016. "Political determinants of fiscal transparency: a panel data empirical investigation," MPRA Paper 72609, University Library of Munich, Germany.
    7. Nancy W. Hudspeth & David F. Merriman & Richard F. Dye & Andrew W. Crosby, 2015. "Do Troubled Times Invite Cloudy Budget Reporting? The Determinants of General Fund Expenditure Share in U.S. States," Public Budgeting & Finance, Wiley Blackwell, vol. 35(4), pages 68-89, December.
    8. repec:spr:ecogov:v:18:y:2017:i:4:d:10.1007_s10101-017-0192-x is not listed on IDEAS
    9. Nicoló Andreula & Alberto Chong, 2016. "Do good institutions improve fiscal transparency?," Economics of Governance, Springer, vol. 17(3), pages 241-263, August.
    10. Mark Schelker, 2012. "The influence of auditor term length and term limits on US state general obligation bond ratings," Public Choice, Springer, vol. 150(1), pages 27-49, January.
    11. Amoroso Nicolás, 2008. "Transparency and Numeric Rules in the Budgeting Process: Theory and Evidence," Working Papers 2008-13, Banco de México.
    12. Schelker, Mark, 2012. "Auditor expertise: Evidence from the public sector," Economics Letters, Elsevier, vol. 116(3), pages 432-435.
    13. Yves M. Tehou TEKENG & Mesbah Fathy SHARAF, 2015. "Fiscal Transparency, Measurement and Determinants: Evidence from 27 Developing Countries," Journal of Economics and Political Economy, KSP Journals, vol. 2(1), pages 69-91, March.
    14. Wehner, Joachim & de Renzio, Paolo, 2013. "Citizens, Legislators, and Executive Disclosure: The Political Determinants of Fiscal Transparency," World Development, Elsevier, vol. 41(C), pages 96-108.

    More about this item

    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
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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