does direct democracy reduce public debt evidence from swiss municipalities although some countries have managed toobtain balanced budgets or even budgetsurpluses in recent times public debts ofmany oecd countries remain at high levels since structural reforms of public spendinghave only infrequently taken place in mostcountries fiscal pressure will increaseagain in the future due to society s ageingand the accompanying increases in socialtransfer spending constitutionalrestrictions on debt levels and legal rulesof the budgetary process such as a strongrole of the minister of finance aresupposed to be helping against the debtbias inherent in political decision makingprocedures in addition to such top downbudgetary procedures this paperinvestigates the impact of referendumapproval of budget deficits by the voterson the level of public debt in a crosssection of the 134 largest swissmunicipalities in 1990

a comparative test of alternative theories of the determinants of italian public deficits 1950 1998 the paper assesses the relative explanatorypower of the keynesian the optimalfinance the contingent liability andseveral public choice theories of thedeterminants of public deficits on italian1950 1998 data a vector error correctionmodel suggests that deficits are sensitiveto unemployment levels interest groups preferences especially the elderly government fragmentation changes in thedegree of stringency of budget rules andexternal economic constraints data insteadprovide a weak or no support to thehypotheses that deficits respond to outputgrowth and electoral events theimplications of the optimal finance and ofthe contingent liability theory arerejected as well

do pensions foster education an empirical perspective the paper examines the effect of population ageing on public education spending on the one hand ageing is expected to have a negative effect on education as an increasing number of retirees resu

sustainable cities do political factors determine the quality of life abstract the implementation of urban sustainability practices is affected by political obstacles and diverse political ideologies may defend different city models sustainable policy design could also be affected by several factors that cause the deflection of resources initially allocated to other groups that are contrary to the concerns pursued and have the power to veto sustainable plans by exerting pressure on the party in power in this sense the aim of this paper is to show the impact that political factors have on cities sustainability and the effect of both on cities economic development to do so we used the 78 spanish cities with a population over 100 000 studied by merco spanish corporate reputation monitor as regards their levels of sustainability for the fiscal years 2008 and 2009 both relationships have been tested empirically through two dependence models using linear regression techniques the results obtained show that political competition improves cities sustainability while a leftist ideology has an inverse impact on the other hand a significant direct relationship has been observed between urban sustainability and municipal economic activity

political instability capital taxation and growth abstract in cross country studies of economic growth average growth rates of gdp per capita tend to be negatively associated both with the size of government and with measures of political instability we show that a linear endogenous growth model with a very simple model of government spending and taxation in the presence of political instability can account for both empirical correlations in addition the model predicts that both correlations are intimately linked thus greater political instability leads to both lower growth rates and a higher share of government spending in gdp

why the middle is unstable the political economy of exchange rate regimes and currency crises the contribution of sticky exchange rates to the rash of currency crises over the past decade has become a major topic of international monetary analysis and policy discussion while there is widespread agreement among economists that the middle of the exchange rate spectrum adjustable pegs is highly crisis prone in a world of substantial capital mobility jeffrey frankel has recently argued that surprisingly we lack a clear theoretical rationale for why this is so this paper attempts to fill that void it argues that frankel is correct in terms of economic analysis alone but that when political economy considerations are introduced then a satisfactory explanation is at hand key aspects of this political economy perspective are laid out and implications for exchange rate policy are considered the analysis suggests that for promoting currency stability the traditionally debated distinctions between crawling bands and managed floats are likely less important than the political environments in which they are operated

elasticities of substitution in caribbean tourism abstract this paper constructs a three level ces model and estimates the effect of real exchange rates on competition for tourism earnings elasticities of substitution are estimated first intra caribbean then among regional aggregates a worldwide and a u s market are both estimated u s tourists substitute relatively more interregionally but less intra caribbean significant effects of political violence are also captured development policy options are examined including the role of parallel tourism exchange rates and caribbean collusion

political and institutional determinants of fiscal policy in the european community in recent theoretical and empirical research the variation in political and institutional arrangements which may affect the process of national policy formation is examined in order to explain cross country differences with respect to fiscal policies pursued in this paper we build upon this literature and examine whether and how cross country differences in debt accumulation and public sector size of member countries of the european community during the 1980s can be explained we conclude that the growth of government debt is positively related to the frequency of government changes and negatively to sound budgetary procedures in countries with left wing governments the growth of the share of government spending in total output generally tends to be higher

political stability and fiscal policy time series evidence for the swiss federal level since 1849 this paper explores the role of political stability on fiscal policy in a time series analysis over 158 years at the swiss federal level we argue that the fiscal commons problem of public finances is affected by the number of years a finance minister remains in office because the incentives for an incumbent to maintain a good reputation with sound policy decisions are stronger a finance minister who succeeds to stay a long time in office enjoys a politically powerful position towards the administration parliament and interest groups in contrast frequent government turnover weakens the position of the finance minister

explaining public investment in western europe budgetary consolidations are considered the obvious explanation for the decline in public investment that most western european countries experienced over the past three decades however regressions based on budgetary variables tend to overpredict public investment during the post 1990 period i e when the budgetary stress eased we supplement the budgetary consolidation approach to public investment with ideas from behavioural economics to explain why these investments do not increase when additional budgetary resources are available we use the peak end evaluation procedure to capture the frustration of voters as cuts in government consumption expenditures accumulate this memory effect of budgetary consolidations implies that voters recall the previous peak in government consumption expenditures they remain discontent as long as current expenditures are below the peak value when the budgetary situation improves policy makers will choose to increase government consumption because this is electora

a common pool theory of supranational deficit ceilings abstract the budget deficit bias is modeled as the result of a domestic common pool problem and of an international externality deficits can be used to finance both unproductive and productive public spending an optimally set supranational deficit ceiling is examined and welfare is compared to the unconstrained outcome and to the case of nationally set deficit ceilings the supranational deficit ceiling is found to be welfare improving relative to similar national arrangements but does not fully eliminate the deficit bias unless combined with a domestic fiscal institution allowing for precommitment to productive public spending

local government grants and income tax revenue redistributive politics in norway 1900 1990 an important aspect of the welfare state is public provision of private goods primarily education and health care in norway the provision of these services has been organized through the local public sector the development of the welfare state has to a large extent been the development of welfare communes the important revenue sources of the local and county governments grants and income tax revenue have been controlled nationally and the paper addresses the determinants of these revenues during 1900 1990 the approach combines a demand model of local public services emphasizing price and income elasticities with a political economy model of central government ideology and strength the decision making is understood as bargaining between the government and interest groups and the political structure consequently is of importance for the policy outcome the analysis shows how politics matter and the results indicate that a minority coalition government implies 30 more grant and income tax revenue to local and county governments than one party majority in the long run

partisan influence on the local tax burden in the netherlands this paper analyses the role of partisan politics in determiningthe local tax burden property taxes are the most important revenuesource which municipalities in the netherlands can decide uponthemselves using a new data set on dutch local property taxes in1996 it is concluded that municipalities with a council dominatedby left wing parties have a higher tax burden we also find thatlarger coalitions have lower levels of taxation finally taxexporting increases tax rates

a politics of institutional choice post communist presidencies this work uses incomplete contracting theory to account for variation in the specific and residual powers of post communist presidencies it uses evidence from 24 post communist countries to test theories of institutional choice that link presidential powers to economic reform institutional legacies party systems and social cleavages it argues that two factors can account for variation in presidential powers the bargaining power of the electoral favorite and the degree of uncertainty over the electoral outcome it tests this model in greater detail against four cases russia 1991 estonia 1992 russia 1993 belarus 1994 three insights flow from these cases first political institutions can be analyzed as the by products of power seeking politicians making choices under varying degrees of uncertainty second despite the great uncertainty of the transition actors understand their interests and strategies third high uncertainty compels political actors to hedge their bets when designing politi

government spending and budget deficits in the industrial economies fiscal policy nouriel roubini and jeffrey sachs this paper examines the evolution of the size of government and of budget deficits in oecd economies we highlight the rapid increase in government spending in the 1970s the sharp rise in budget deficits and public debt after 1973 and the reversal in these trends in the 1980s the increase in the size of government was associated in part with the slowdown in growth after 1973 but also reflected gradual adjustment of the ratio of spending to output towards a long run target which depends on political and institutional characteristics of the economy the political orientation of the government the degree of wage indexation and the degree of stability of the political system such factors also explain the size of budget deficits when faced with an adverse shock subsequent deficit reduction requires a measure of political consensus we note that such consensus is hard to achieve in multi party coalitions in consequence countries with such a political structure tended in consequence countries with such a political structure tended toin consequence countries with such a political structure tended to experience much more rapid increases in their debt gnp ratios

the electoral budget cycle on municipal waste collection expenditure abstractthis article analyses the determinants of municipal waste collection expenditure specifically the effects of electoral cycles on municipal waste collection expenditure we use a database with information on spanish municipalities with more than 1000 inhabitants for the period 2002 2011 our results reveal that incumbents adopt an opportunistic behaviour increasing spending on waste in the preelection year and reducing it in the election and post election years therefore we confirm an electoral budget cycle on waste collection expenditures in spain additionally we find that the levels of income unemployment and upper level governments transfers have a positive impact on waste collection spending finally population density level of urbanization average age of the population of the municipality and less fragmented governments negatively influence waste collection spending

a partisan model of government expenditure partisan models of budget politics largely concentrate on the size of government budget deficits and debt but most theories have little to say as to what the effect of party politics on both the size and the composition of budgets is this paper seeks to extend previous literature in two directions first a model of spending preferences is developed that relates actors preferred level and allocation of expenditure to electoral gains from fiscal policies second changes in both total expenditure and the expenditure mix of two budget categories are analyzed for the effect of parties spending preferences as stated in their election manifestos using data on 19 oecd countries from 1971 to 1999 the paper finds support for general partisan hypothesis the results suggest that the actual spending preferences of parties matter whereas they do not indicate that parties of the left consistently differ from parties of the right in their spending behavior

an investigation of the public deficts and government spending relationship evidence for greece this paper tests the validity of the buchanan wagner hypothesis for greece that increases in public spending are the result of the tolerance of large deficits over the period 1961 1994 to test this hypothesis three unit root pretests the dickey fuller phillips perron and kwiatkowski et al and maximum likelihood estimation techniques of cointegrating vectors and a vector error correction model are employed a long run relationship is found to exist among government spending deficit income wages and adult population and the importance of short run deviations are presented the empirical evidence suggests that buchanan and wagner hypothesis seems to find support for greece in the long run and the short run further productivity in the public sector is lower than in the private sector and the growth of income is not an important determinant of the increase in the relative size of public spending

political fractionalization and delay in fiscal stabilizations a duration analysis this article employs a duration analysis approach to empirically investigate whether political fractionalization leads to delayed fiscal stabilizations using a broad sample of both developed and developing countries for the period 1975 2011 we consistently find strong evidence that political fractionalization is significantly associated with longer delays in stabilizing high deficits in particular political fractionalization has a greater impact on delays in periods of macroeconomic distress we also show that while the fractionalization of government parties delays fiscal stabilization the fractionalization of opposition parties tends to facilitate fiscal stabilization

the case for restricting fiscal policy discretion this paper studies the effects of discretionary fiscal policy on output volatility and economic growth using data for 91 countries we isolate three empirical regularities 1 governments that use fiscal policy aggressively induce significant macroeconomic instability 2 the volatility of output caused by discretionary fiscal policy lowers economic growth by more than 0 8 percentage points for every percentage point increase in volatility 3 prudent use of fiscal policy is explained to a large extent by the presence of political constraints and other political and institutional variables the evidence in the paper supports arguments for constraining discretion by imposing institutional restrictions on governments as a way to reduce output volatility and increase the rate of economic growth

the influence of decentralized taxes and intergovernmental grants on local spending volatility abstractthe influence of decentralized taxes and intergovernmental grants on local spending volatility regional studies this paper studies what affects the volatility of sub central public spending in 20 organisation for economic co operation and development oecd countries the evidence based on data from 1972 to 2007 shows that the volatility of intergovernmental grants from upper levels is positively associated with the volatility of local expenditure on the other hand the volatility of local tax revenues mainly that of property taxes exerts the opposite effect these findings suggest that making local governments rely more on grants than own tax revenues adversely affects their spending stability allowing them to levy autonomously taxes relying on responsive tax bases provides incentives to smooth their expenditure

fragmented government effects on fiscal policy new evidence most industrialized countries entered the 1980s with their public finances in disarray at the time persistent deficits pushed up public debt to gdpratios despite such similarities deficit spending varies substantially between countries and within countries over time recent theoretical and empirical research has considered how differences in political arrangements affecting national policy formation might explain variation in fiscal policies pursued using a panel of 22 oecd countries over the 1971 1996 period this paper extends previous literature on the effects of fragmented government on fiscal policy outcomes in various directions first we focus on data relating to central government instead of general government as all theories refer to central government second not only do we analyze the effect of size fragmentation of government we also examine government s position vis a vis parliament and government s political fragmentation we find evidence that more fragmented government defined in terms of the number of political parties in a coalition or the number of spending ministers have higher deficits there is also some evidence that governments that dispose of excess seats in parliament have lower deficits right wing governments appear to have been fiscally more responsible in the seventies political fragmentation does not affect government s budget deficit

on government centralization and fiscal referendums abstract several authors have argued that a centralization of fiscal powers in a federation is less likely to occur if citizens have to approve a change in the assignments of responsibilities by a popular referendum this outcome may be due to the fact that logrolling is more difficult under direct than under representative democracy it may also be caused by citizens fear that a centralization of fiscal authority facilitates the extraction of rents by the government or the legislature in this paper we test the hypothesis that centralization is less likely under referendum decision making in the unique institutional setting of switzerland using a panel of swiss cantons from 1980 to 1998 the empirical analysis provides evidence that referendums induce less centralization of fiscal activities

effects of government characteristics on fiscal deficits in 18 oecd countries 1961 1994 political economists studying industrialized countries have claimed that certain institutional characteristics of governments such as majority status the number of parties in government and stability affect levels of public deficits they have specifically argued that weak unstable governments produce higher deficits than strong stable ones the author tests the validity of such claims by examining empirical data from 18 organization for economic cooperation and development oecd countries between 1961 and 1994 it is shown that evidence does not support the deficit prone weak governments thesis if anything there is some evidence to suggest that deficits are lower under what political economists call weak unstable governments such as minority governments coalition governments or less durable governments it is further shown that there is extremely limited evidence to support another line of argument that the strength stability of governments does not necessarily create deficits but does affec

the political economy of fiscal policy an experimental study on the strategic use of deficits field data on the strategic use of deficits to limit thebudgetary scope of future governments are inconclusive aboutthe effects of political polarization or a government sre election probability on fiscal policy therefore wedesigned a controlled experiment to examine the strategic useof deficits using a within subjects design we find thatdeficits rise with a higher degree of polarization and a lowerreelection probability however in a between subjects designneither polarization nor reelection probabilities have asystematic effect we discuss the implications of ourexperimental results for empirical tests of the strategic useof deficits with field data

the impact of collective and competitive veto points on public expenditures in the global age this study examines the determinants of public expenditures in advanced market economies by simultaneously assessing the impact of domestic political institutions and globalization a distinction is made between collective veto points and competitive veto points demonstrating that not all veto points have restrictive effects it is shown that public expenditures are significantly and positively affected by collective veto points whereas the oppositeis true for competitive veto points thereby indicating that not all veto points are created equal in addition to veto points the effects of globalization are also assessed revealing that globalization is exerting little reform pressures on the welfare state with strong evidence indicating that more globalization buoys public expenditures current disbursements and social transfers are both positively influenced by globalization these findings suggest that domestic political institutions continue to shape policy trajectories in this purported global age

what do oecd countries cut first when faced with fiscal adjustments expenditure in this article we explore the relationship between components of government expenditure and government size during the period 1970 2007 for a sample of 25 developed countries to shed light on how fiscal discipline might influence public spending composition in the coming years using the pooled mean group estimation we find that fiscal adjustments protect functions that have both a social and productive character such as education and health spending in addition the most productive spending that related to transport and communications is also isolated from budgetary cuts this result shows evidence of governments reacting to the voter s increasing realization that reducing productive expenditures harms long term economic growth by striking a balance between utility and economic growthenhancing expenditure

multiparty government and economic policy making multiparty government has often been associated with poor economic policy making with distortions like lower growth rates and high budget deficits one proposed reason for such distortions is that coalition governments face more severe common pool problems since parties use their control over specific ministries to advance their specific spending priorities rather than practice budgetary discipline we suggest that this view of multiparty government is incomplete and that we need to take into account that coalitions may have established certain control mechanisms to deal with such problems one such mechanism is the drafting of a coalition agreement our results when focusing on the spending behavior of cabinets formed in 17 western european countries 1970 1998 support our claim that coalition agreements matter for the performance of multiparty cabinets in economic policy making more specifically we find clear support for an original conditional hypothesis suggesting that coalition agreements significantly reduce the negative effect of government fragmentation on government spending in those institutional contexts where prime ministerial power is low

does the welfare state destroy the family evidence from oecd member countries we study the effect of the size of the welfare state on family outcomes in oecd member countries exploiting exogenous variation in public social spending due to varying degrees of political fractionalization i e the number of relevant parties involved in the legislative process we show that an expansion in the welfare state increases the fertility marriage and divorce rates with a quantitatively stronger effect on the marriage rate we conclude that the welfare state supports family formation nevertheless we also find that the welfare state decouples marriage and fertility and therefore alters the organization of the family authors abstract

theory and evidence of municipal borrowing in chile although chilean municipalities are not permitted to borrow they do so through arrears and leasing contracts a formal model of municipal indebtedness is estimated based on a sample of 345 municipalities with yearly data from 2004 to 2007 variables that are positively and significantly related to borrowing through arrears are mayors closely tied to the ruling central government coalition politically diverse municipal councils years close to elections and deeper municipal involvement in education while leasing contracts appear to be insensitive to political factors they are positively and significantly related to municipal staff managerial skills and municipal revenues per capita

determinants of corporate social disclosure in spanish local governments this paper contributes to previous country level analyses of non financial reporting in the public sector by studying public transparency in relation to sustainability as well as by assessing the determinants of sustainability disclosure practices in spanish municipalities we have carried out a content analysis of the websites of 102 spanish local governments subsequently we have employed different statistical techniques biplots and dependence models to analyse the extent of disclosure and to determine the impact of certain contextual and political factors on transparency in matters of sustainability when compared to the amount of information that is revealed concerning financial issues disclosure practices regarding social and environmental information are rather scarce we have also observed that several political factors more specifically the presence of conservative governments and political rivalry may become genuine barriers to municipal transparency based on these findings we can make two policy recommendations first it seems necessary to establish national policies laws or recommendations that generate similar levels of transparency among local governments in order to avoid social dilemmas in this sense similar accountability processes limit non sustainable behaviours playing a similar role to that of markets for the private sector second accountability processes should focus on the addition of information concerning social and environmental actions and on informing of the effects of municipalities on them going beyond the strictly economic dimension

voting on the budget deficit comment textabstractin this comment it is argued that a balanced budget rule may cause underinvestment as a consequence such a rule is not ex ante efficient in order to achieve the ex ante optimal outcome it would be necessary to add an extra rule for the level of public investment unfortunately however such an investment rule is likely to be very difficult to implement in practice when there are no rules to prevent underinvestment it is no longer clear whether a balanced budget rule is beneficial or not in some cases the cost of low levels of investment outweigh the benefits of a balanced budget

politics institutions and fiscal performance in a federal system an analysis of the argentine provinces abstract we posit that the fiscal behavior of argentine provinces is determined by a common pool game at two levels within each province and across political units in the latter game the national government has a greater incentive than the provincial governments to internalize the negative externality of fiscal imprudence given relatively strong party discipline the president is able to induce governors from his party to internalize a portion of the externality to a greater extent than opposition governors in argentina party matters for fiscal behavior but it does so for reasons different from those identified in studies of oecd countries

do large cabinets favor large governments evidence on the fiscal commons problem for swiss cantons abstract the fiscal commons problem is one of the most prominent explanations of excessive spending in political economics for a panel of the 26 swiss cantons over the 1980 1998 periods this paper explores the role of fragmented governments on fiscal policy outcomes we distinguish between two variants of fragmented governments cabinet size and coalition size in addition we analyze whether constitutional rules for executive and legislature as well as formal fiscal restraints shape the size of government and how different rules interact with fragmentation the results indicate that the number of ministers in the cabinet is positively associated with the size of government while fiscal referendums effectively restrict the size of government there is also evidence that fiscal referendums relax the fiscal commons problem to some extent

the macroeconomic effects of fiscal rules in the us states abstract fiscal policy restrictions are often criticized for limiting the ability of governments to react to business cycle fluctuations and consequently the adoption of quantitative restrictions is viewed as inevitably leading to increased macroeconomic volatility in this paper we use data from 48 us states to investigate how budget rules affect fiscal policy outcomes our key findings are that 1 strict budgetary restrictions lead to lower policy volatility i e less aggressive use of discretion in conducting fiscal policy and 2 fiscal restrictions reduce the responsiveness of fiscal policy to output shocks these two results should have opposite effects on output volatility while less discretion should reduce volatility less responsiveness of fiscal policy might amplify business cycles we provide empirical support for the first effect restrictions by reducing discretion in fiscal policy can reduce macroeconomic volatility

do the personal characteristics of finance ministers affect changes in public debt using a unique dataset of the personal characteristics of national finance ministers in western europe 1980 2010 i show that a finance minister s experience affects the national debt to gdp ratio the increase in the debt to gdp ratio is smaller if the finance minister stays in office for an additional year this result is robust to the inclusion of the personal characteristics of prime ministers and a measure of political stability however the magnitude of the effect is sensitive to how finance ministers are selected in the econometric model when more than one minister holds office during a particular year the estimation of interaction terms further reveals that experience particularly matters in election years or in times of negative gdp growth because an experienced finance minister has the power to restrict the usual increase in the debt to gdp ratio in contrast a finance minister s educational background and ideological leaning have no significant impact on the debt to gdp ratio

the weak government thesis some new evidence this paper presents new evidence on the hypothesis that coalition governments will find it more difficult to keep their budgets in line after an adverse economic shock than do one party majoritarian governments the estimates are based on a broad sample of oecd countries for the period 1979 1995 using various specifications as suggested in the literature we do not find evidence that the type of government affects cross country variation in fiscal policy however the number of political parties in government affects central government debt growth

the political determinants of fiscal policies in the states of india an empirical investigation abstract using data from the 14 major states of india we investigate whether state governments fiscal policy choices are tempered by political considerations our principal findings are twofold first we show that certain fiscal policies experience electoral cycles state governments raise less commodity tax revenue spend less on the current account and incur larger capital account developmental expenditures in election years than in all other years second we show that coalition state governments raise less own non tax revenues and spend less on the current account than state governments that are more cohesive in composition in sum the dispersion of political power affects government size

revealed yardstick competition local government efficiency patterns in norway this paper investigates whether the production efficiency of norwegian local governments exhibits a spatial pattern that is compatible with the hypothesis of yardstick competition in order to check whether yardstick competition is really responsible for the observed spatial pattern and rule out alternative theoretical explanations the paper exploits unique information from a survey on local politicians attitudes towards comparative evaluation of local bureaus performances against other jurisdictions benchmarking merging the latter information with the observed interdependence in efficiency the paper provides evidence that comparative performance evaluation generates positive spatial auto correlation in local efficiency indicators

fragmented fiscal policy abstract this paper explores on a panel of 19 oecd countries the role of fragmentation in determining fiscal outcomes over the 1970 95 period we first define the notion of fragmentation of fiscal policy making as the degree to which the costs of a dollar of aggregate expenditure are internalized by individual decision makers empirically this notion has two key logical components the number of decision makers and the rules of the game or the budget process in turn the number of decision makers can refer to the number of parties in a coalition or the number of ministers in the cabinet we test all these determinants against each other and against perhaps the oldest explanation of all ideology we show that cabinet size and to a lesser degree coalition size and ideology are significant and robust determinants of fiscal outcomes in particular transfers are the budget items most affected by these factors

political parties and monetary commitments we argue that political parties will choose monetary institutions in order to help them win elections and retain office increased levels of economic openness in the industrial democracies have complicated the pursuit of office by altering the policy preferences of constituents and decreasing the ability of cabinet ministers to deliver promised economic outcomes we contend that monetary commitments can help political parties manage diverse constituent interests restore policy effectiveness and ultimately maintain their position in office therefore we expect that fixed exchange rates and central bank independence can improve cabinet durability especially under conditions of economic openness in the first section we discuss how fixed exchange rates and central bank independence can insulate cabinets from the political shocks of increased economic openness to determine the political value of these commitments we then test the effect of exchange rate commitments and central bank independence on cabinet durability in the second section in the third section we use the results of our statistical models to generate expected cabinet durability for the countries in our sample under alternative institutional configurations by comparing the expected durabilities we show that most monetary reforms have helped or at least not hurt expected cabinet durability

decentralization and inflation commitment collective action or continuity do political and fiscal decentralization make it easier or harder to control inflation statistical analysis of average annual inflation rates in a panel of 87 countries in the 1970s and 1980s found no clear relationship between decentralization and the level of inflation political decentralization however does appear to reduce change in countries relative inflation rates over time by creating additional veto players federal structure may lock in existing patterns of monetary policy whether inflationary or strict among the mostly developed countries that started with low inflation inflation tended to increase more slowly in federations than in unitary states among the mostly developing countries that started with high inflation inflation tended to increase faster in the federations there is evidence that political decentralization locks in a country s degree of practical central bank independence whether high or low and the relative hardness or softness of budget constraints on subnational governments

barriers to investment in polarized societies i present a tractable dynamic model of political economy where disagreements about the composition of public spending result in implementation of short sighted policies the relative price of investment to consumption is excessively large in equilibrium due to over taxation investment rates are too low which slows down growth along the transition in the long run this results in output consumption and welfare being inefficiently low the larger is the degree of polarization the greater is the inefficiency political stability mitigates the effects of polarization by making the incumbent internalize the dynamic inefficiencies introduced by the choice of growth retarding policies

partisan politics and public finance changes in public spending in the industrialized democracies 1955 1989 this paper evaluates the role that partisan politics plays in altering public spending levels the analysis covers over three decades of data on the developments of the public sectors in 16 oecd countries the results of the analysis lend firm support to the partisan politics model of special note is the distinction between the electorate and the government ideological preferences and the dominant role that the former plays the results also suggest contrary to conventional wisdom that partisan political influences have not been eliminated with the tightening of linkages to the international economy

auctions vs bookbuilding and the control of underpricing in hot ipo markets market returns before the offer price is set affect the amount and variability of initial public offering ipo underpricing thus an important question is what ipo procedure is best adapted for controlling underpricing in hot versus cold market conditions the french stock market offers a unique arena for empirical research on this topic since three substantially different issuing mechanisms auctions bookbuilding and fixed price are used there using 1992 1998 data we find that the auction mechanism is associated with less underpricing and lower variance of underpricing we show that the auction procedure s ability to incorporate more information from recent market conditions into the ipo price is an important reason copyright 2003 oxford university press

municipal debt in switzerland new empirical results switzerland has experienced extensive institutional reforms at the local level that could influence local debt these reforms have included municipal mergers greater inter communal cooperation reformed political decision making mechanisms and the introduction of new public management measures many of these reforms originated at the cantonal level however the institutional diversity among swiss municipalities hardly has diminished a cross sectional analysis for the 137 largest swiss cities and villages in 2004 shows that direct democratic rights and a high degree of fiscal autonomy lead to a lower level of local debt there is no statistical support for the hypothesis that reforms following the new public management guidelines had an effect on debt levels

an evaluation of eu regional policy do structural actions crowd out public spending motivated by the lack of success of previous studies trying to estimate the impact of the european cohesion policy this paper brings an unexplored issue to light transfers that are intended to finance public investment in key areas for growth might be crowded out by subsidized governments to alternative uses in fact using annual data from fifteen member countries 1993 2005 we conclude that public investment in the member countries makes up around 60 of the increase in eu funds the limited role of the european commission in the allocation of the funds could partially explain this result

the political economy of fiscal consolidations in the context of recent research in political economy this paper addresses the policy problem of fiscal consolidation in terms of three types of issues i the macroeconomic effects of alternative strategies to consolidate ii the institutional setups conducive to a consolidation and iii the best strategy for implementing a consolidation in order to maximize its political feasibility one methodological feature of this survey is an emphasis on policy feasibility one methodological feature of this survey is an emphasis on policy issues in order to bridge the gap between the level of abstraction of politico economic models of fiscal policy and the issues faced by a policymaker when attempting a fiscal consolidation

exchange market mayhem the antecedents and aftermath of speculative attacks exchange market mayhem the antecedents and aftermath of speculative attacks this paper evaluates the causes and consequences of episodes of turbulence in foreign exchange markets using data from 1959 through 1993 for twenty oecd countries we consider the antecedents and aftermath of devaluations and revaluations flotations fixings and speculative attacks which may not be successful we find that realignments of fixed exchange rates are alike devaluations are preceded by political instability budget and current account deficits and fast growth of money and prices revaluations are mirror images of devaluations speculative attacks resemble devaluations but money growth and inflation are more endemic and there is no last minute attempt to tighten monetary policy in contrast few consistent correlations link regime transitions like flotations or fixings to macroeconomic or political variables transitions between exchange rate regimes are largely idiosyncratic and are neither consistently provoked ex ante by systematic imbalances nor typically justified ex post by subsequent changes in policy we conclude that there are no clear early warning signals of many speculative attacks and no easy solutions for policy makers barry eichengreen andrew k rose and charles wyplosz

political fragmentation party ideology and public expenditures in this paper we propose an original model of competition for effective political power between majority and opposition coalitions the model indicates that the electoral margin of the majority and the fragmentation of both coalitions are key variables that determine their effective political power we estimate the model in the case of the french departements our econometric results support the model and show that the per capita social expenditures in the french departements depend on the effective political power of the majority

social interaction effects and connection to electricity experimental evidence from rural ethiopia abstractthis article assesses the importance of social interactions in determining an individual s choice to connect to an electrical grid using an original data set on a new rural electrification program in ethiopia combining global positioning system information with random allocation of discount vouchers for connection to the grid we show that neighbors connection behaviors have large effects on a household s connection decision this effect is also shown to decrease by distance no peer effect is found for neighbors living farther than 100 meters away evidence also suggests that expectation interactions through social learning of the benefits of electricity or constraint interactions through direct externalities of one s connection on others well being are unlikely to fully account for these effects and that preference interactions through a keeping up with neighbors type of mechanism appear to be a plausible explanation we discuss implications for further research and the design of dev

on constraining fiscal policy discretion in emu we review the theoretical and empirical literature on the benefits and costs of imposing restrictions on fiscal policy we emphasize that the arguments in favour of restricting discretion of fiscal policy go beyond the notion of avoiding unsustainable budgetary plans that can lead to pressure on the central bank restrictions on fiscal policy can also be justified on the grounds that discretionary changes in spending or taxes can lead to unnecessary volatility in output and lower economic growth empirically there is evidence that implicit constraints on governments can be as effective as explicit constraints i e rules from the analysis in emu countries in the last 10 years we conclude that there has been a significant change in the conduct of fiscal policy in terms of increased discipline and less use of discretion however since 1999 there are clear signs of fatigue in this process as previous trends have either stopped or even reversed copyright 2003 oxford university press

single party rule public spending and political rents evidence from finnish municipalities in this paper i investigate the differences in public spending and extraction of political rents between single party and coalition governments common pool theories predict that coalitions tend t

policy volatility institutions and economic growth abstract in this paper we present evidence that policy volatility exerts a strong and direct negative impact on growth using data for 93 countries we construct measures of policy volatility based on the standard deviation of the residuals from country specific regressions of government consumption on output undisciplined governments that implement frequent and large changes in government spending unrelated to the state of the business cycle generate lower economic growth we employ both instrumental variables and panel estimation to address concerns of omitted variables and endogeneity a 1 standard deviation increase in policy volatility reduces long term economic growth by about 0 74 in the panel regressions and by more than 1 percentage point in the cross section

tax contracts and elections in this paper we examine the impact of tax contracts as a novel institution on elections policies and welfare we consider a political game in which three parties compete to form the government and voters may behave strategically parties have policy preferences about the level of public good provision and benefit from perks when in office a government raises taxes for both purposes we show that tax contracts yield moderate policies and lead to lower perks by avoiding the formation of grand coalitions in order to win government moreover in polarized societies they unambiguously improve the welfare of the median voter

economic and political determinants of fee income in norwegian local governments this paper presents an empirical analysis of the determinants of fee income in norweigan local governments the point of departure is a representative voter model emphasizing the effects of pure economic variables the benchmark model is extended by including two aspects of the political system ideology and strength it is evident that increased socialist influence increases the size of the local public sector while a strong political leadership has an advantage in opposing pressure to increase spending