Fiscal Rules and Government Size in the European Union

Jochen Mierau and Eduard Suari-Andreu

No 4693, CESifo Working Paper Series from CESifo

Abstract: This paper studies the impact of national fiscal rules on government size as measured by the ratio of government expenditures to gross domestic product. We develop a model of the budgetary process and show that a common pool problem may arise which can be mitigated through fiscal rules. We test the model’s predictions using a novel time-series cross-section dataset of 27 European Union members for the period between 1990 and 2011. Corroborating the model, we find that fiscal rules have a negative impact on government size. Contrasting the model, their impact becomes smaller as the number of ministers increases.

Keywords: political fragmentation; fiscal rules; government size (search for similar items in EconPapers)
JEL-codes: E61 H11 H61 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Fiscal rules and government size in the European Union (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4693

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