Given the importance that can be assigned to the quality of budget execution, one would expect that there would be a solid literature describing and explaining patterns of budgetary outcomes within and across countries. In fact, as reviewed below, this literature is quite uneven. There is a quite deep literature on the accuracy of revenue forecasting. Most of these studies, however, are not cross-country in nature and tend to focus on state and local governments within federal systems in developed nations where data are available for long time periods. Aggregate expenditure outcomes are described in considerable detail in the fiscal economics literature but almost always in the context of actual spending. Deviations from budgetary targets are rarely explored and, when they are, the topic is usually related to fiscal rules.<sup>2</sup> The literature associated with political institutions and budgetary procedures includes empirical tests of some specific hypotheses regarding the quality of fiscal outcomes, notably with regard to deficits and borrowing, but little or nothing is said about budgetary expenditure deviations per se. The public financial management (PFM) literature provides good information about the technical means by which budget execution can be improved<sup>3</sup> but this author has yet to find any systematic cross-country analysis of budgetary deviations or what drives them.

This paper makes three contributions. First, it introduces a new database of budgets and budgetary outcomes that should prove useful to researchers and practitioners in several fields. The database is derived from raw data found in PEFA country reports and includes 159 observations from 45 countries over multiple three year time periods with between 9 and 23 budget heads (line items) per observation for a total of just over three thousand budget heads.

Second, it provides an in-depth analysis of cross-country patterns of deviations from aggregate and compositional budget targets. The analysis here examines the degree to which actual revenues and spending deviate from approved budgetary allocations. This is followed by an analysis of compositional deviations. In general, it seems that very few countries are able to execute their budgets well, regardless of whether governments are prioritizing macroeconomic stability or public service delivery. There are widespread errors in forecasting revenues and within-year countercyclical financing does not always compensate for revenue deviations. Expenditure deviations therefore tend to be positively correlated with revenue deviations. Within this broad tendency, there is considerable variation in behavior not only across countries but also across time within countries. Within any specific country and year, it is also common to observe over-spending in some budget heads occurring simultaneously with under-spending in others. Compositional deviations from budgetary expenditure allocations therefore tend to be greater than deviations in aggregate expenditures.

Third, a number of hypotheses are proposed and tested that might help explain why some governments execute their budgets well while others do not. Most of these hypotheses can be grouped into just a few categories: the impact of debt service burdens, common pool behavior, the characteristics of political institutions, and the technical capacity for PFM. While this paper does not focus exclusively on any one variable, the capacity for PFM is of particular importance because investments in PFM capacity and quality offer a way forward for reform minded governments. In particular, it would be useful to learn if the quality of PFM affects the quality of budgetary execution after controlling for other variables.

The results of the hypothesis testing are interesting. Common pool tendencies to spend beyond approved borrowing limits are driven by the existence of various pressure groups that politicians

> 2 An example can be found in Section VI.B of Kopits (2001).

> 3 Shah (2007) for example includes an entire chapter on the subject.

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