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The politics within institutions for regulating public spending: conditional compliance within multi-year budgets

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  • Bernard Steunenberg

    (Leiden University)

Abstract

Multi-year budget frameworks are often considered as instruments for controlling spending, including in the context of the European Union. This paper shows that the effects of multi-year budgeting depends on several conditions, some of which, may lead to more rather than less spending. The analysis is based on a model of a finance minister’s decision to enforce a previously accepted budget ceiling in subsequent negotiations with a spending minister. The analysis takes account of uncertainty about preferences in these negotiations, positive transaction costs to the finance minister, and the possibility of political mediation through the prime minister. The findings of this paper show that compliance with budget frameworks improves under temporarily stable preferences (e.g. the absence of external shocks), more homogenous preferences within the government (e.g. majoritarian governments in contrast to coalition government), preference similarity between the finance minister and the prime minister (in case of mediation), and increasing transaction costs. In other circumstances, multi-annual frameworks will not be able to block any upward pressure on expenditures.

Suggested Citation

  • Bernard Steunenberg, 2021. "The politics within institutions for regulating public spending: conditional compliance within multi-year budgets," Constitutional Political Economy, Springer, vol. 32(1), pages 31-51, March.
    • Handle: RePEc:kap:copoec:v:32:y:2021:i:1:d:10.1007_s10602-020-09323-5
    DOI: 10.1007/s10602-020-09323-5
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    More about this item

    Keywords

    Public spending; Multi-year budgets; Budgetary politics; Budget control; Political decision-making; Rules; Compliance;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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