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.