Political budget cycles and media freedom

This paper examines the effects of elections on the conduct of central governments' fiscal policies. To do so, it uses a unique panel database that includes disaggregated spending and revenue series at the central government level for multiple countries over the 1975–2010 period. Examining political environments under which incumbent governments generate political budget cycles (PBCs), and comparing the relative importance of factors influencing cycles, we identify media freedom as the factor that plays the most critical role. This result provides a micro-foundation for rational opportunistic models for PBCs that rely on asymmetry of information about politicians' competence, and also offers a way to relate different conditioning factors of PBCs, including fiscal transparency and the maturity of democracies. Further, we show that the election-year rise in budget deficits under low media freedom is primarily driven by an increase in the current, not capital, component of public expenditure.     

Making rules credible: divided government and political budget cycles

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.     

Interrogating sub-Saharan Africa's high economic growth rate and low poverty reduction rate: A poverty paradox?

Sub-Saharan Africa's (SSA) high economic growth coincides with an increase in the level of poverty. In a panel of 40 SSA countries over a 30-year period, while accounting for the potential spillover effect of poverty in the region. The study found that economic growth recorded over the years has not translated to poverty reduction, particularly, in resource-rich economies of SSA. The result also shows that income inequality worsens the effect of economic growth on poverty and that the poverty-reducing effectiveness of growth varies considerably across sectors, across space, and over time. The research findings suggest that governments across the region, particularly, in oil-exporting countries in SSA must diversify the economy away from oil (toward the service sector) to reduce poverty in the region.     

Separation of powers and political budget cycles

Political budget cycles (PBCs) arise when the electorate is imperfectly informed about the incumbent’s competence and the incumbent has discretion over the budget. Focusing on the second condition, we study how separation of powers affects PBCs in the composition of government spending. We find that the details of the budget process, namely, the bargaining rules, the status quo’s location, and the degree of compliance with the budget law, are critical for the existence and the amplitudes of PBCs. In particular, when the status quo is determined by the previous budget and there is high compliance with the budget law, separation of powers acts as a commitment device which solves the credibility problems that drive PBCs.     

Redistributive policies in decentralised systems: The effect of decentralisation on subnational social spending

This article uses cross‐national data to examine the effects of fiscal and political decentralisation on subnational governments’ social expenditures. It revisits the benefit competition hypothesis put forward by fiscal federalism research, which posits that subnational governments in decentralised countries match welfare benefit reductions by their peers to keep taxes low and avoid an in‐migration of welfare dependents. As a consequence, subnational social expenditures are assumed to plateau at similar and low levels. Using a new cross‐national dataset on social expenditures in 334 subnational units across 14 countries and 21 years, the author explores whether benefit competition causes subnational governments to converge on similar levels of social spending. The analysis reveals that as countries decentralise, subnational social spending levels begin to diverge rather than converge, with some subnational governments reducing their social expenditures and others increasing them. Furthermore, decentralisation is not likely to be associated with lowest common denominator social policies, but with more variability in social expenditure. The article also examines the effects of other macro‐level institutions and demonstrates that policy coordination influences the relationship between decentralisation and subnational social spending levels.     

The young and the restless: housing access in the critical years

Abstract

How do governmental housing policies affect the ability of young people to exit the parental home? This paper makes three claims. First and most important, governments that create accessible and liquid mortgage markets make it easier for young people to launch from the parental home. Second, even in those countries with more liquid housing markets, younger generations today still have an increasingly difficult time realising their preferences compared to prior generations. Third, increasing income and wealth inequality interacts with housing markets to create this uneven playing field both within and across generations. This paper examines these relationships in 20 high-income OECD countries. Fewer adult children live in the parental home in countries with deep mortgage markets, high levels of social rented housing, tax relief for ownership, low buyers' transaction costs and high residential mobility. These countries cut across the traditional housing regime typologies, highlighting the need for additional housing-specific theory building.     

The Transaction Costs of Government Responses to the COVID-19 Emergency in Latin America

The COVID-19 pandemic has created a crisis that is challenging national and local governments to innovate in their responses to novel problems. Despite similarities to the challenges confronted in developed countries, for Latin American governments, these problems are amplified by structural obstacles such as social inequalities. These countries must respond with capacities and resources that are often limited by spoils systems and by social and political polarization. This essay provides an overview of some innovative practices in Argentina, Brazil, Chile, Colombia, and Mexico. In particular, this essay concentrates on some salient collaborative efforts in the region. To draw lessons from these practices, the authors focus on the formal and informal institutions that facilitate or obstruct collaboration across jurisdictions. The findings are discussed in terms of the transaction costs of collaboration identified in these experiences.     

Under pressure. Economic constraints,electoral politics and labour market reforms in Southern Europe in the decade of the Great Recession

Even when subject to comparable exogenous constraints during the Eurozone crisis and in its immediate aftermath, governments in Southern Europe have pursued distinct labour market reform agendas. What room for manoeuvre did governments of crisis-struck peripheral countries really have in shaping their labour market reform strategies, and how can we account for the observed variation? We address these questions by making a twofold contribution to the debate on the political economy of austerity in the Eurozone periphery. First, through the first systematic analysis of all labour market and collective bargaining (CB) reforms implemented in Portugal, Spain, Italy and Greece over 2009–2019, we identify those elements of core labour market deregulation common across Southern European countries (namely, the loosening of employment protection for workers on open-ended contracts and the decentralisation of CB to the firm level); and those elements of variation, both cross-country and cross-party, in the content of corollary labour market interventions that accompanied this core deregulation. Second, we explain these similarities and variations in reform outcomes as the product of the interaction of two factors: economic constraints and electoral dynamics. We argue that the implementation of the common core of deregulation is linked to the exogenous pressure to improve export competitiveness to which Southern European countries have been subjected since the crisis. Through the combination of survey data analysis and qualitative evidence, we then show empirically how the variation in the corollary measures accompanying deregulation is linked to the class composition of the electoral social blocs Southern European partisan governments rely on or aim to assemble. Based on this analysis, we identify four ideal-typical labour market reformist strategies attempted by Southern European governments during the decade of the Great Recession. The analysis highlights that although domestic politics plays a crucial role in shaping structural adjustment under crisis conditions, not all reform strategies are equally viable within the framework of Economic and Monetary Union.     

Reforming Budget Systems in Countries of the Former Soviet Union

The countries of the former Soviet Union (FSU) required considerable revision to their budget processes and procedures to establish systems consistent with transformation from controlled dependencies within a larger planned economy to independent governments of fledgling market-oriented democracies. This article considers the degree to which preexisting, reforming, and reformed budget systems in FSU countries deliver the basic expectations of a public sector resource allocation system. Evidence indicates failures to realign budgeting and finance systems designed for command and control environments to the demands of more market based economic systems, with effects often magnified by the hybrid economies of these transitional states. Significant difficulties and shortcomings in the ability of existing systems to perform basic public sector allocation, management, and control functions are the result, but some countries are ahead of others and their experience can guide reforms across the FSU.     

The Impact of the European Union on Coalition Formation in a Minority System: The Case of Denmark

Does European Union membership influence coalition patterns in national parliaments? For governments in the Scandinavian countries – with their relatively high share of minority governments requiring external parliamentary support to form parliamentary majorities – the question of ‘coalition management’ is highly relevant. This article provides an empirical test of three central arguments in the Europeanisation literature on the impact of EU membership on national parliaments when political parties pass legislation in the Danish Folketing. The effect of EU content in a law on coalition patterns is compared across policy areas and four electoral periods from 1998 to 2011 encompassing 2,894 laws. The data provide support for the argument that the loss of national agenda‐setting over the legislative process has an impact on coalition patterns in the Danish parliament. It is shown that the coalition patterns on Europeanised legislation are both broader and more stable compared to national, non‐EU‐related legislation. The focus on Europeanisation of legislative coalitions goes beyond previous analysis with an institutional focus, and demonstrates an example of how the EU systematically has an effect on legislative coalition formation in a national parliamentary system.     

International Institutions and Domestic Compensation: The IMF and the Politics of Capital Account Liberalization

Certain governments have been faster than others in relaxing their restrictions on the cross‐border movement of capital. How can we explain the timing and extent of financial liberalization across countries since the 1970s? We argue that IMF stabilization programs provide a window of opportunity for governments to initiate financial reforms, but that policy makers are more likely to seize this opportunity when welfare expenditures are high. Large loans from the IMF shield policy makers from the costs of financial reform, while welfare expenditures provide credibility to the government's ex ante promises of compensation to individuals who are harmed by the reforms. We test this hypothesis on data for 87 countries from 1975 to 2002. We employ a spatial autoregressive error sample selection model which accounts for the nonrandom participation of countries in IMF programs as well as the processes of international policy diffusion. The results provide strong support for the interactive effect of IMF programs and domestic welfare expenditures on financial liberalization.     

Oil,elections and fiscal transparency

How does governments’ ability to gain financing from oil income affect their behaviour? Numerous studies have explored the effects of oil wealth on countries’ political characteristics, especially the level of democracy. Oil has also been associated with a significant electoral incumbency advantage across different political regimes. However, the relationship between oil wealth and incumbent governments’ behaviour, including election-year fiscal manipulation, has been studied to a lesser extent. This article argues that higher oil rents increase election-year public spending as they provide national governments both with direct revenue and increased financing opportunities. However, fiscal transparency mitigates this effect. Consequently, oil-induced electoral budget cycles decrease as fiscal transparency increases. Using a high-quality measure of fiscal transparency in a panel of countries, robust evidence in favour of this argument is found. The findings suggest that many of the previous results on the political effects of oil, including incumbency advantage, might run through an election-year spending channel, and that fiscal institutions might matter substantially for the political effects of oil.     

The Impact of Fiscal Crisis on Decision‐Making Processes in European Governments: Dynamics of a Centralization Cascade

The Great Recession resulted in fiscal crises for governments across the Western world. Significant cuts in government programs were initiated as many governments scrambled to reduce their growing budget deficits. This article explores how European governments reacted during the recent crisis. In particular, the authors focus on the interlinkages between shifts toward more centralized decision making. The article uses a survey of thousands of public sector executives in 17 European countries. The authors find evidence of a centralization cascade, such that centralizing one element of the decision‐making process leads to greater centralization throughout the system. Results also show that having a high number of organizational goals and facing clear sanctions for failing to achieve goals lead to greater centralization, but greater organizational commitment reduces the need to centralize.     

A problem-based approach to understanding public support for referendums

A prominent explanation of widespread popular support for referendums is dissatisfaction with the functioning of representative democracy. In this article, the aim is to gain a better understanding of how dissatisfaction affects support for referendums. Drawing on previous research, it is argued here that citizens follow a problem-based approach in their support for referendums, in that referendums are considered a suitable solution to address some specific problems in a political system but not all. Survey data from the 2012 European Social Survey (29 countries; N = 37,070) is used to show that citizens’ expectations towards and evaluations of representatives relate to support for referendums. In particular, dissatisfaction with the ability of governments to listen to their citizens is associated with higher support for referendums. In contrast, citizens dissatisfied with the government's ability to lead are less supportive of referendums. Furthermore, the relationship between dissatisfaction with governments’ ability to listen varies across countries depending on the level of experience with decision making via referendum. In countries where referendums are used more often, the expectation of referendums being able to solve the problem of unresponsive government is weaker. This study offers important insights into the different ways in which preferences and evaluations of representative practices relate to popular support for referendums.     

Government 'strength' and budget deficits in advanced democracies

Abstract. Roubini and Sachs provided the first systematic test of the idea that political structure the size, composition, diversity, and/or stability of a governing cabinet - is related to budget deficits. In this paper, we take issue with several of Roubini and Sachs' choices concerning data and operationalization, and argue that their approach cannot offer clear conclusions about the relationship between national political structure and budget deficits. We test the 'strength of government' hypothesis using central government finance data on 16 countries, 1959–1990. We measure deficits in a way that maximizes comparability across countries but avoids the potential problems of standardizing by GDP. We examine carefully the definition and measurement of 'strength of government', in light of recent theoretical and empirical work in comparative politics. We perform pooled time-series regression analysis of deficit change in 16 OECD countries for the period 1959–1990. We argue that while structural differences between governments may have little impact on deficits during good economic times, they may become especially noticeable and influential during periods when governments struggle to cope with severe economic problems.     

Federal Dynamics of Changing Governance Arrangements in Education: A Comparative Perspective on Australia,Canada and Germany

Abstract

Education policy is a highly interesting field from the point of view of governance, given the substantial changes that have been made throughout the world to the governance of such policy over the last 30 years or so. Western governments in particular have made significant changes in the governance arrangements of their education policy in order to achieve two fundamental goals: increased efficiency and greater accountability. In this process, the role of governments has changed but not diminished. This paper explores such developments by comparing the trajectories of governance reforms in three federal countries (Australia, Canada and Germany). What emerges is that the role of governments is key to all governance mixes modelled by the reform processes in the three analysed countries, and that there is greater “national” coordination than before, but also significant differences in the strategies adopted and in the content of reform, due to the differing nature of such countries’ federal dynamics.     

Political geography

I study a model of geopolitical organization endogenizing the size of nations, their public spending and their degree of openness. The optimal geography may not be a stable equilibrium and a bias toward too many countries tends to emerge. An exogenous increase in openness tends to reduce the size of countries but also to increase the size of their public sectors. When openness is endogenous there can be multiple equilibria, some with globalization backlash associated with large nations and small governments and others with smaller countries, bigger governments and high openness. However, stable equilibria may imply excessive globalization, too many countries and too much government spending.     

Intergovernmental Structure and Fiscal Management Strategies: A Crossnational Analysis

Does intergovernmental structure have a systematic effect on the impacts of local governments' fiscal policy responses? Using empirical data from more than 800 local governments in five countries, the article concludes that intergovernmental structure is associated with the impact attributed to various fiscal management strategies. Such strategies have generally had greater impact in local governments in federal systems than those in unitary state systems. There are similarities between federal and unitary local governments regarding the fiscal management strategies that have least impact, and both types stress the importance of productivity gains via technology. But the differences in relative importance and level of impact are more striking than the similarities. In particular, fiscal management strategies involving the relations of the local government with other governments, such as obtaining intergovernmental revenue and shifting service provision to other governments, have greater impact in significantly more federal systems than in unitary state systems. These federal local governments also experience greater impacts from increasing user charges and raising local taxes. In contrast, local governments in unitary state systems place greater reliance on the more politically expeditious strategy of across–the–board expenditure reductions and on reductions of capital spending. These findings suggest that local governments in more decentralized systems have greater flexibility to manipulate relations with other governments in order to enhance their own fiscal situation. The data also suggest that the government's level of fiscal stress is not systematically associated with the level of impact from most fiscal management strategies, especially in the unitary state systems.     

Public Service Professionalism for Performance Measurement and Evaluation

For over fifty years, efforts have been made to measure the results of government activities. Most recently, performance measurement and evaluation have been key components of government reforms in many countries in reaction to loss of confidence in governments and budget stringency. Emphasis is on measuring outcomes or results within a general framework of strategic planning and objective setting, and in a context of devolution, managerial decentralization, and privatization. While it seems reasonable that governments should justify their use of public funds by demonstrating the effectiveness of their programs and activities, performance measurement in practice is by no means straightforward and demands considerable thought in its design and implementation.