The Political Economy of Fiscal Prudence in Historical Perspective

36 Pages Posted: 1 Feb 2010

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Mark Dincecco

University of Michigan at Ann Arbor

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This paper uses a new panel dataset to perform a statistical analysis of political regimes and financial rectitude over the long run. Old Regime polities in Europe typically suffered from fiscal fragmentation and absolutist rule. By the start of World War I, however, many such countries had centralized institutions and limited government. Panel regressions indicate that political transformations toward centralized and limited regimes led to significant improvements in fiscal prudence. Dynamic estimations and structural breaks tests reinforce these findings. The results suggest that good financial housekeeping is one mechanism through which political reforms reduce sovereign credit risk.

Suggested Citation

Dincecco, Mark, The Political Economy of Fiscal Prudence in Historical Perspective. Economics & Politics, Vol. 22, Issue 1, pp. 1-36, March 2010, Available at SSRN: or

Mark Dincecco (Contact Author)

University of Michigan at Ann Arbor ( email )


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