believe they need to cater to, more so in democracies. Larger populations create such pressure since they are more likely to have more interest groups, including various ethnic factions and aging populations.

Revenue surpluses constitute a second common pool to spend from, in addition to soft borrowing constraints. Revenue deviations are partially the consequence of policy choices: unambitious revenue targets are correlated with unprogrammed revenue gains while overly ambitious revenue targets are correlated with revenue shortfalls. Revenue targets are more likely to be achieved in countries with presidential systems and/or strong capacity for public financial management.

Counter-cyclical financing is often used to at least partially smooth out unanticipated revenue shocks. Countries tend to do this better when they have strong capacity for PFM and high percapita incomes. Low capacity countries, measured by small expenditure shares for their civil service, small populations, or very young populations tend to underspend in the face of unanticipated revenue gains. In addition, the presence of mature programmatic political parties appears to contribute to compositional accuracy in budget execution. Finally, high debt service burdens are correlated with, and must surely be the consequence of, revenue shortfalls and excessive spending. Yet, countries with high debt service burdens also tend to apply positive revenue shocks to debt reduction while negative revenue shocks induce reduced spending.

These results point to some policy implications. For most countries, reducing revenue deviations is the key to keeping expenditures on track both in level and in composition. To achieve this, governments should manage the ambitiousness of their revenue policy targets and make the kinds of investments that improved the capacity for public financial management. In some situations, capacity building may also require bringing in more skilled workers and ensuring they are adequately paid and motivated. Taking these actions will make it easier to achieve revenue policy targets while also reducing common pool problems. Such investments are surely easier to afford in wealthy countries but governments in low income countries may be able to advance to the extent that external financial and technical assistance is effective.

The remainder of the paper is organized in the following manner. A short literature review is presented in Section II. A new database is introduced and analyzed in Section III. Section IV delves deeper into the literature in order to develop a number of hypotheses that might help explain the patterns found in Section III. Testable hypotheses are presented in Section IV. Data characteristics and the econometric strategy for inference testing are discussed in Section V. The test results and policy implications are discussed in the Section VI. Conclusions and a proposed agenda for future work by interested researchers are found in Section VII.

# **II. Literature Review**

Little has been published about the distribution of budgetary revenue and expenditure deviations around the world. Much more has been written about the distribution of budgetary balances. In the case of revenues, Buettner and Kauder (2010) is a rare example of a cross-country survey of revenue forecasting practices and outcomes within OECD countries. They found a wide range of outcomes within the period 1995 through 2009. All countries displayed a mix of positive and negative deviations from budgetary targets, but some countries showed a wide spread between maximum and minimum deviations while other countries tended to show a more narrow 4