The Evolution and Convergence of the Government Expenditure Composition in the OECD Countries

In the light of models of composition ofgovernment expenditure and economic growthand the growing globalization process, weinfer that countries should tend to asimilar structure of government spendingover time. In fact, using Tukey box-plotsand σ-convergence we show evidenceof an approaching process in thecomposition of government expenditures inOECD countries for the period 1970–1997. Wealso identify by means of cluster analysisthat most countries are converging towardstwo different models: one including twelveEuropean and non-European countries and theother composed solely of eight countries ofthe European Union.     

Tax Structure Turbulence in OECD Countries

This paper analyses whether and to what extent politiciansmanipulate tax structures strategically in order to winelections or for ideological purposes. We introduce anindicator for tax structure turbulence which measures thedegree to which a country's tax structure changes from oneyear to another. Using data on 18 OECD countries over theperiod 1965–1995, we find clear evidence of a politicalbudget cycle in national tax structures. More precisely, wefind that in election years, tax structures are changedsignificantly less than in other years. Further, thedispersion of political power significantly lowers the abilityof governments to change the tax structure. We do not,however, find any evidence of partisan budget cycles innational tax systems following political regime changes.     

Local Government Structure and Public Expenditures

The ``Law of 1/n'' postulates a positive relationship betweenthe number of democratically electedrepresentative districts and governmentspending. Strong support for thisrelationship exists in legislatures in theUnited States (at both the state andnational level) and across countries. Fewstudies have examined this relationship atthe local level despite the fact that localgovernments operate under constraintssimilar to those faced by representativelegislatures. Using a sample of Georgiacounties we find the number of countycommissioners to be positively correlatedwith county government expenditures,indicating support for the Law of 1/nat the local level.     

Electoral Competition and Agricultural Support in OECD Countries

Agricultural trade protectionism in developed countries remains a politically charged issue, yet few studies have attempted to explain the political dynamics behind this important trade issue. We consider agricultural subsidies as a type of distributive policy that targets the agricultural sector at the expense of consumers and taxpayers. Based on Cox (1987, 1990) and Myerson (1993) , we argue that electoral systems that encourage politicians to appeal to a narrow constituency tend to have a higher level of agricultural support. We test this theoretical hypothesis using OECD agricultural support data disaggregated by commodity and country. A cross-classified multilevel model is employed to account for complex variation of agricultural support across countries, commodities, and time. Our empirical results show that electoral systems that encourage politicians to target narrow (broad) constituencies are associated with relatively high (low) levels of agricultural subsidies.     

Success and Failure of Fiscal Consolidation in the OECD: A Multivariate Analysis

This paper tests five hypotheses explaining thesuccess and failure of fiscal consolidation in amultivariate regression framework. These hypothesesconcern (i) the composition of the consolidationprogramme, (ii) its size and persistence, (iii) thegravity of the debt situation, (iv) the influence ofthe international macroeconomic environment and (v) thecontribution of a preceding devaluation. To testfor composition effects we use cyclically-adjusteddata. Although many conclusions of the existingempirical literature are confirmed, some do notsurvive. A popular hypothesis – that to succeed, consolidationshould rely on cutting the government wagebill – is rejected. A new empirical result is that thecontribution of a devaluation to the success of fiscalconsolidation depends on the composition of theconsolidation programme.     

Government ideology and monetary policy in OECD countries

Public Choice - We examine the extent to which government ideology has influenced monetary policy in OECD countries since the 1970s. In line with important changes in the global economy and...     

The Federal, and the State and Local Roles in Government Expenditures

This article compares government expenditures by functional category of the federal government relative to state and local governments and the changes in their respective roles since 1955. The article includes a review of the federal role relative to the state and local role on a function-by-function basis for these three and a half decades. This analysis demonstrates considerable stability in the federal sector and the state and local sector, but also the capacity for change.     

Fiscal Policy Cycles and Public Expenditure in Developing Countries

The paper studies empirically the fiscal policy instruments by which governments try to influence election outcomes in 24 developing countries for the 1973–1992 period. The study finds that the main vehicle for expansionary fiscal policies around elections is increasing public expenditure rather than lowering taxes, and public investment cycles seem particularly prominent. Institutional mechanisms which constrain discretionary expenditure policies and which strengthen fiscal control are therefore worthwhile considering to prevent opportunistic policy making around elections.     

Fiscal Decentralization and Intergovernmental Transfers in Less Developed Countries

This article addresses the issue of fiscal decentralizationin developing countries, and the use of intergovernmental transfersto achieve this objective. We find that developing countrieshave more centralized fiscal structures and argue that thisis consistent with the theory of fiscal federalism. Economicdevelopment, however, does push the advantage toward decentralization.We also show that developing countries use a wide variety oftransfer instruments to fund local governments, and that theseinstruments give the national government varying degrees ofcontrol over local government finances.     

Regulatory Transparency in OECD Countries: Overview, Trends and Challenges

The concept of transparency has rapidly gained prominence in Organisation for Economic Cooperation and Development (OECD) countries. It is particularly associated with the rise of the governance agenda, as transparency is a core governance value. The regulatory activities of government constitute one of the main contexts within which transparency must be assured. There is a strong public demand for greater transparency, which is substantially related to the rapid increase in number and influence of nongovernmental organisations (NGOs) or 'civil society groups', as well as to increasingly well educated and diverse populations.
Transparency initiatives now form a major part of the regulatory policies of many OECD countries: in 2000, 20 of the 30 OECD member countries had government-wide transparency policies (OECD 2002a). Many OECD countries have now made substantial investments in improved regulatory transparency, and have reaped important gains in terms of regulatory quality, legitimacy and accountability.
However, despite these gains, the results have in many cases fallen short of expectations. As well, the implementation of transparency has itself led to new stresses and problems within the regulatory process. This article considers why regulatory transparency is important and points to some of the main trends in improving regulatory transparency. It also considers a range of problems and issues that arise and suggests means of resolving these.     

Tax and Expenditure Limitations and the Fiscal Response of Local Government: Asymmetric Intra-Local Fiscal Effects

This article empirically investigates the effects of introducing statewide measures to limit the ability of local jurisdictions to raise revenue or make expenditures. It does so in intervals of five years over a 25-year period, using fiscal observations for 31,804 units of local government in 787 metropolitan counties across the contiguous United States. Specifically explored is the effect of tax and expenditure limitations on the variation in revenues and expenditures between general purpose governments and school districts within county areas. Rather than imposing a uniform constraint across jurisdictions, tax and expenditure limitations (TELs) are associated with increased variation across both general purpose and school district revenues and expenditures and, by implication, increased service differentials. Effects are found to be asymmetric, with increased variation greatest within counties comprising the urban core and those with relatively more disadvantaged populations. The implications are that TELs are most constraining on the ability of governments serving economically less prosperous and at risk populations to meet public service needs. Such differential effects are of more than questionable merit and are the result of the application of blunt instruments to what is often an undemonstrated need. The outcome impairs both the efficiency and responsiveness of the local public sector.     

Leviathan and Fiscal Illusion in Local Government Overlapping Jurisdictions

This paper integrates twomodels of local government behavior,leviathan and fiscal illusion, into theframework of overlapping jurisdictions.Estimation of the leviathan and fiscalillusion variables without accounting forvertical effects between overlappingjurisdictions results in overestimation ofthe horizontal effects. Using a medianvoter model and municipal and county datawe find support for the leviathan modelusing traditional tests. These effects arelargely offset, however, when the test isset within the context of the verticalrelationship. We find that municipal percapita expenditures and county per capitaexpenditures are symmetricallycomplementary.     

Transparency, Political Polarization, and Political Budget Cycles in OECD Countries

We investigate the effects of fiscal transparency and political polarization on the prevalence of electoral cycles in fiscal balance. While some recent political economy literature on electoral cycles identifies such cycles mainly in weak and recent democracies, in contrast we show, conditioning on a new index of institutional fiscal transparency, that electoral cycles in fiscal balance are a feature of many advanced industrialized economies. Using a sample of 19 OECD countries in the 1990s, we identify a persistent pattern of electoral cycles in low(er) transparency countries, while no such cycles can be observed in high(er) transparency countries. Furthermore, we find, in accordance with recent theory, that electoral cycles are larger in politically more polarized countries.     

Legislative Professionalism and Budget Punctuations in State Government Sub‐Functional Expenditures

Contrary to budgetary incrementalism, disproportionate information processing theory revealed that budget outcomes show episodic but dramatic changes as well as stabilized ones. A relatively less explored question is why such budget punctuations occur. Disproportionate information processing theory suggests that decision‐makers' lack of information processing capacity and institutional frictions are the main reasons for budget punctuations. Empirical analyses imply that governmental expenditures are exposed to varying levels of available information and institutional frictions and patterns of budget punctuations differ across the different types of governmental expenditures. The findings in this paper reveal that whether enhanced staff assistance for individual legislators can increase or decrease budget punctuations highly depend on the programmatic and institutional nature of state government sub‐functional expenditures.     

Political Strategies and Fiscal Retrenchment: Evidence from Four Countries

Political strategy matters – especially in the case of unpopular reforms. This is the main argument of this article. It shows that the analysis of political strategies gives complementary insights into the causal mechanisms of reform politics. It helps us to understand how political actors successfully implement unpopular reforms. The article provides empirical evidence for this claim by means of an analysis of adjustment efforts in Sweden, Belgium, Canada and France during the 1990s. It is shown that governments acted strategically in two areas: they used strategic manoeuvres in the political sphere in order to circumvent veto players. And they employed strategic organisation and communication in the public sphere in order to dampen the risk of being punished by voters for the implemented policies.     

Fiscal Policy Learning from Crisis: Comparative Analysis of the Baltic Countries

The experience of a major crisis is often expected to lead to policy learning but the empirical evidence about this is limited. The goal of the paper is to explore comparatively whether the crisis of 2008–2010 has led to fiscal policy learning by civil servants in the three Baltic countries. Despite some differences in the crisis experience, the finance ministry officials in all three countries have identified the same lesson from the crisis: fiscal policy should be counter-cyclical and help to stabilize the economy. The paper also discusses how various factors have influenced policy learning, including the acknowledgment of failure, blame shifting, and analytical tractability.     

The Effects of Political and Fiscal Incentives on Local Government Behavior: An Analysis of Fiscal Slack in China

This study examines the determinants of fiscal slack from the perspective of Chinese local government officials. Given China's rapid economic growth over the past 30-plus years, Chinese local governments reportedly hold huge slack resources that attract public scrutiny. In an effort to improve their fiscal performance, some localities recently established budget stabilization funds, following a top-down initiative. However, it remains unclear to what extent fiscal slack has accumulated and which factors affect slack resource levels of Chinese local governments. By employing a panel dataset (249 prefecture-level cities, 1999–2009), this study finds that political and fiscal factors exert significant influence over local officials’ decisions about slack resource levels. The findings of the study bear implications for establishing fiscal rules and improving the performance of sub-national governments in China and other countries.