Political Trust and the Success of Fiscal Consolidations

TIGER Working Paper No. 101

33 Pages Posted: 4 Dec 2007

Date Written: July 1, 2007


The paper examines the effects of political trust on fiscal consolidations. Building on the works of Easton (1965) and Gamson (1968) a theoretical framework is derived on the main channels through which the success of fiscal consolidation can be affected by the level of political trust in the system. The predictions of the theory are tested quantitatively based on evidence from the Economic and Monetary Union and qualitatively through a most-likely - least-likely case comparison between Hungary and Sweden. The results provide strong support for the hypotheses and indicate that in the absence of external pressures lasting fiscal consolidations can take place only in a high-trust regime. In a low-trust regime even if an external crisis triggers adjustment, the incentive to buy support through short-term promises ultimately erodes the commitment to restraint and imbalances reemerge.

Keywords: trust, fiscal consolidation, budgetary reforms, economic populism, role of ideas

Suggested Citation

Győrffy, Dóra, Political Trust and the Success of Fiscal Consolidations (July 1, 2007). TIGER Working Paper No. 101, Available at SSRN: https://ssrn.com/abstract=1036881 or http://dx.doi.org/10.2139/ssrn.1036881

Dóra Győrffy (Contact Author)

University of Debrecen ( email )

Böszörményi u. 138
H-4032 Debrecen, 4032

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