 Why are corrupt countries less successful in consolidating their budgets?Kerim Arin, Viera Chmelarova, Eberhard Feess () and Ansgar Wohlschlegel Journal of Public Economics, 2011, vol. 95, issue 7-8, 521-530 Abstract: Following the financial crisis, many countries introduced fiscal stimulus packages making budget consolidations in the future rather challenging. Using a data set for 28 OECD countries spanning the period 1978-2007, we contribute to the literature on success probabilities of consolidation attempts by exploring the impact of corruption, and in particular the interplay of corruption and the choice of the policy instrument. We find that corruption significantly reduces the success rate. When controlling for the change in government expenditures, however, the impact of corruption is insignificant or at least becomes less pronounced. We therefore relate the choice of the fiscal instrument to corruption and find that corrupt countries rely significantly less on expenditure cuts during periods of consolidation attempts. We conclude that international organizations should be careful in observing what corrupt countries do when trying to consolidate their budgets. Keywords: Corruption; Fiscal; consolidation; Binary; choice; models (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:95:y:2011:i:7-8:p:521-530 Access Statistics for this article Journal of Public Economics is currently edited by R. Boadway and J. Poterba More articles in Journal of Public Economics from Elsevier |
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