Do Budget Rules Work?
The design of budget rules and institutions, long a neglected area in public finance and macroeconomics, has recently been thrust to center stage by the debate over a balanced budget amendment and other deficit-reduction measures in the United States. This paper describes the existing evidence on how budget rules affect fiscal policy outcomes. It contrasts the `institutional irrelevance view,' which holds that budget rules can be circumvented by modifying accounting practices and changing the nominal timing or other classification of taxes and expenditures, with the `public choice view' in which fiscal institutions represent important constraints on the behavior of political actors. Several distinct strands of empirical evidence, from the U.S. federal experience with anti-deficit rules, from U.S. state experience with balanced budget rules, and from international comparisons of budget outcomes in nations with different fiscal institutions, suggest that fiscal institutions do matter. These results reject the institutional irrelevance view. The existing evidence is not refined enough, however, to provide detailed advice on how narrowly-defined changes in budget rules might affect policy outcomes.
|Date of creation:||Apr 1996|
|Publication status:||published as in A.Auerbach ed., Fiscal Policy: Lessons From Empirical Research (Cambridge: MIT Press, 1997) pp.53-86|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Douglas Holtz-Eakin, 1988. "The Line Item Veto and Public Sector Budgets: Evidence from the States," NBER Working Papers 2531, National Bureau of Economic Research, Inc.
- Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1991.
"Generational Accounts: A Meaningful Alternative to Deficit Accounting,"
NBER Chapters,in: Tax Policy and the Economy, Volume 5, pages 55-110
National Bureau of Economic Research, Inc.
- Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1991. "Generational Accounts - A Meaningful Alternative to Deficit Accounting," NBER Working Papers 3589, National Bureau of Economic Research, Inc.
- Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1991. "Generational accounts: a meaningful alternative to deficit accounting," Working Paper 9103, Federal Reserve Bank of Cleveland.
- repec:cup:apsrev:v:88:y:1994:i:04:p:811-828_09 is not listed on IDEAS
- Reischauer, Robert D., 1990. "Taxes and Spending Under Gramm-Rudman-Hollings," National Tax Journal, National Tax Association, vol. 43(3), pages 223-32, September.
- Weingast, Barry R & Marshall, William J, 1988. "The Industrial Organization of Congress; or, Why Legislatures, Like Firms, Are Not Organized as Markets," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 132-163, February.
- von Hagen, Jurgen & Harden, Ian J., 1995. "Budget processes and commitment to fiscal discipline," European Economic Review, Elsevier, vol. 39(3-4), pages 771-779, April.
- International Monetary Fund, 1996. "Budget Processes and Commitment to Fiscal Discipline," IMF Working Papers 96/78, International Monetary Fund.
- Alesina, Alberto & Hausmann, Ricardo & Hommes, Rudolf & Stein, Ernesto, 1999. "Budget institutions and fiscal performance in Latin America," Journal of Development Economics, Elsevier, vol. 59(2), pages 253-273, August.
- Alesina, Alberto & Hausmann, Ricardo & Hommes, Rudolf & Stein, Ernesto H., 1996. "Budget institutions and fiscal performance in Latin America," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34295, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
- Stein, Ernesto & Hommes, Rudolf & Hausmann, Ricardo & Alesina, Alberto, 1999. "Budget Institutions and Fiscal Performance in Latin America," Scholarly Articles 4553021, Harvard University Department of Economics.
- Ricardo Hausmann & Alberto Alesina & Rudolf Hommes & Ernesto H. Stein, 1998. "Budget Institutions and Fiscal Performance in Latin America," Research Department Publications 4160, Inter-American Development Bank, Research Department.
- Alberto Alesina & Ricardo Hausmann & Rudolf Hommes & Ernesto Stein, 1996. "Budget Institutions and Fiscal Performance in Latin America," NBER Working Papers 5586, National Bureau of Economic Research, Inc.
- Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-971, October.
- Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles 3451400, Harvard University Department of Economics.
- Adam S. Posen, 1995. "Declarations Are Not Enough: Financial Sector Sources of Central Bank Independence," NBER Chapters,in: NBER Macroeconomics Annual 1995, Volume 10, pages 253-274 National Bureau of Economic Research, Inc.
- Preston, Anne E. & Ichniowski, Casey, 1991. "A National Perspective on the Nature and Effects of the Local Property Tax Revolt, 1976-1986," National Tax Journal, National Tax Association, vol. 44(2), pages 123-145, June.
- Gramlich, Edward M, 1990. "U.S. Federal Budget Deficits and Gramm-Rudman-Hollings," American Economic Review, American Economic Association, vol. 80(2), pages 75-80, May.
- Burton Abrams & William Dougan, 1986. "The effects of constitutional restraints on governmental spending," Public Choice, Springer, vol. 49(2), pages 101-116, January.
- Holtz-Eakin, Douglas, 1988. "The line item veto and public sector budgets : Evidence from the states," Journal of Public Economics, Elsevier, vol. 36(3), pages 269-292, August.
- Ronald J. Shadbegian, 1996. "Do Tax And Expenditure Limitations Affect The Size And Growth Of State Government?," Contemporary Economic Policy, Western Economic Association International, vol. 14(1), pages 22-35, January.
- Preston, Anne E. & Ichniowski, Casey, 1991. "A National Perspective on the Nature and Effects of the Local Property Tax Revolt, 1976-1986," National Tax Journal, National Tax Association, vol. 44(2), pages 123-45, June.
- Bayoumi, Tamim & Goldstein, Morris & Woglom, Geoffrey, 1995. "Do Credit Markets Discipline Sovereign Borrowers? Evidence from US States," CEPR Discussion Papers 1088, C.E.P.R. Discussion Papers. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:5550. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.