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The Political Economy of Fiscal Consolidation

  • Robert W.R. Price
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    This paper explores the political economy of fiscal adjustment. It begins with an examination of the evidence for, and sources of, ‘deficit bias’, including political and governance factors, public attitudes, the role of financial markets and imprecision about which debt targets should be pursued. It then examines the evidence regarding the exogenous and policy-related factors which affect the success of fiscal consolidation efforts. This is followed by a discussion of the role of fiscal institutions, including fiscal rules and autonomous agencies. The final section considers how the political economy of fiscal policy has changed with the financial crisis, giving some indications as to what may be needed to re-establish a consolidation path and make it less prone to setbacks. L'économie politique de l'ajustement budgétaire Ce document explore l’économie politique de l’ajustement budgétaire. Il commence par examiner l’existence et les sources d’un biais en faveur des déficits. Parmi ces sources on peut citer les facteurs de politique économique et de gouvernance, les attitudes de la population, le rôle des marchés financiers et le manque de précision concernant les cibles de dette à atteindre. Il s’intéresse ensuite aux facteurs exogènes ou liés à l’action des pouvoirs publics qui affectent le succès des efforts d’assainissement des finances publiques. Enfin le rôle des institutions budgétaires est abordé, y compris celui des règles budgétaires et des agences autonomes. La dernière section s’interroge sur la façon dont la crise financière a modifié l’économie politique de la politique budgétaire en donnant quelques pistes sur ce qui pourrait s’avérer nécessaire pour rétablir une trajectoire de consolidation et la rendre moins vulnérable aux rechutes.

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    Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 776.

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    Date of creation: 31 May 2010
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    Handle: RePEc:oec:ecoaaa:776-en
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