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Political Factors Behind Cuts and Surges in Government Spending: The Effects on Old Market Democracies and Post-Communist Countries

39 Pages Posted: 28 Dec 2015 Last revised: 22 Jun 2017

Konstantin Moshe Yanovskiy

Gaidar Institute for Economic Policy

Sergei Zhavoronkov

Gaidar Institute for Economic Policy

Kirill Rodionov

Gaidar Institute for Economic Policy

Date Written: December 26, 2015

Abstract

Surges and cuts are explained here by some of the political factors affecting governments' abilities to balance the budget broadly discussed in the literature. We focus on territorial separatism, minority government, grand coalition, single party government, and the ruling party's ideology. Special attention is paid to the phenomenon of universal suffrage, which has caused the rise to power of modern left-wing parties and strong special interest groups within the bureaucracy.

Most political factors turn out to be time- and case-sensitive except for universal suffrage. A severe crisis can open the window of opportunity to cut public expenditure, while favorable economic conditions stimulate claims for redistribution and spikes in government spending. The most effective way to curb the instability of public finance is to strengthen pro-reformist political coalitions, claiming defense of national identity and moral values, that encourage austerity and are market-friendly.

Keywords: Separatism, political competition, budget deficit, universal suffrage, window of opportunity

JEL Classification: D72, D78, H11, H62, N40

Suggested Citation

Yanovskiy, Konstantin Moshe and Zhavoronkov, Sergei and Rodionov, Kirill, Political Factors Behind Cuts and Surges in Government Spending: The Effects on Old Market Democracies and Post-Communist Countries (December 26, 2015). Available at SSRN: https://ssrn.com/abstract=2708533 or http://dx.doi.org/10.2139/ssrn.2708533

Konstantin Moshe Yanovskiy (Contact Author)

Gaidar Institute for Economic Policy ( email )

Gazetny pereulok, 3-5
Moscow, 125993
Russia

Sergei Zhavoronkov

Gaidar Institute for Economic Policy ( email )

3-5 Gazetny Lane
Moscow, 125009
Russia

Kirill Rodionov

Gaidar Institute for Economic Policy ( email )

3-5 Gazetny Lane
Moscow, 125009
Russia

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