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Do Budgetary Institutions Mitigate the Common Pool Problem?

Author

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  • Jakob de Haan
  • Richard Jong-A-Pin
  • Jochen O. Mierau

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.

Suggested Citation

  • Jakob de Haan & Richard Jong-A-Pin & Jochen O. Mierau, 2012. "Do Budgetary Institutions Mitigate the Common Pool Problem?," KOF Working papers 12-303, KOF Swiss Economic Institute, ETH Zurich.
    • Handle: RePEc:kof:wpskof:12-303
    DOI: 10.3929/ethz-a-007250003
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    Cited by:

    1. Nerlich, Carolin & Reuter, Wolf Heinrich, 2013. "The design of national fiscal frameworks and their budgetary impact," Working Paper Series 1588, European Central Bank.
    2. Heylen, Freddy & Hoebeeck, Annelies & Buyse, Tim, 2013. "Government efficiency, institutions, and the effects of fiscal consolidation on public debt," European Journal of Political Economy, Elsevier, vol. 31(C), pages 40-59.
    3. Kauder Björn & Larin Benjamin & Potrafke Niklas, 2014. "Was bringt uns die große Koalition?: Perspektiven der Wirtschaftspolitik," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 15(1), pages 88-101, February.

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