Do Budgetary Institutions Mitigate the Common Pool Problem?

Jakob de Haan, Richard Jong-A-Pin () and Jochen Mierau

No 12-303, KOF Working papers from KOF Swiss Economic Institute, ETH Zurich

Abstract: We analyze how budgetary institutions affect government budget deficits in member states of the European Union during 1984-2003 employing new indicators provided by Hallerberg et al. (2009). Using panel fixed effects models, we examine whether the impact of budgetary institutions on budget deficits is conditioned by political fragmentation (i.e., ideological differences among parties in government) and size fragmentation (i.e., the effective number of parties in government or the number of spending ministers). Our results suggest that strong budgetary institutions, no matter whether they are based on delegation to a strong minister of finance or on fiscal contracts, reduce the deficit bias in case of strong ideological fragmentation. In contrast, the impact of budgetary institutions is not conditioned by size fragmentation.

Keywords: Budgetary institutions; Fiscal policy; Political fragmentation; Size fragmentation (search for similar items in EconPapers)
Pages: 25 pages
Date: 2012-05
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:kof:wpskof:12-303

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