Making rules credible: divided government and political budget cycles

Jorge Streb () and Gustavo Torrens ()

Public Choice, 2013, vol. 156, issue 3, 703-722

Abstract: Political budget cycles (PBCs) can result from the credibility problems office-motivated incumbents face under asymmetric information, due to the temptation to manipulate fiscal policy to increase their electoral chances. We analyze the role of rules that limit public debt, because borrowing is a necessary condition for aggregate PBCs. Since the legislature must typically authorize new debt, divided government can make these fiscal rules credible. Commitment is undermined by either unified government or imperfect compliance with the budget law, which can help explain why PBCs are stronger in developing countries and in new democracies. When divided government affects efficiency, voters must trade off electoral distortions and government competence. Copyright Springer Science+Business Media, LLC 2013

Keywords: Political budget cycles; Unified government; Rules; Credibility; Divided government; D72; D78; H60 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
http://hdl.handle.net/10.1007/s11127-012-9923-2 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Making rules credible: Divided government and political budget cycles (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:pubcho:v:156:y:2013:i:3:p:703-722

Ordering information: This journal article can be ordered from
http://www.springer. ... ce/journal/11127/PS2

DOI: 10.1007/s11127-012-9923-2

Access Statistics for this article

Public Choice is currently edited by WIlliam F. Shughart II

More articles in Public Choice from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().