Budget Institutions and Government Effectiveness

43 Pages Posted: 13 Jan 2017

See all articles by Momi Dahan

Momi Dahan

Hebrew University of Jerusalem - School of Public Policy; CESifo (Center for Economic Studies and Ifo Institute)

Michel Strawczynski

Bank of Israel - Research Department; Hebrew University of Jerusalem - Dept. of Economics

Date Written: November 2016

Abstract

Do budget institutions play a role in explaining why government effectiveness is higher in some advanced countries than in others? Employing an original panel dataset that spans four different years (1991, 2003, 2007 and 2012) we find that budget centralization has a negative and significant effect on government effectiveness in OECD countries after accounting for a list of control variables such as GDP per capita and government expenditure in addition to country and year fixed effects. We show that less centralized countries display significant better performance in health and infrastructure but similar effectiveness in tax collections. The negative impact of budget centralization seems to bite especially at the execution stage of the budgeting process, while it is not significant at the formulation and legislation stages. These results survive a list of sensitivity tests.

Keywords: government effectiveness, budgeting process, bureaucratic autonomy

JEL Classification: H110, H610

Suggested Citation

Dahan, Momi and Strawczynski, Michel, Budget Institutions and Government Effectiveness (November 2016). CESifo Working Paper Series No. 6219, Available at SSRN: https://ssrn.com/abstract=2898132 or http://dx.doi.org/10.2139/ssrn.2898132

Momi Dahan (Contact Author)

Hebrew University of Jerusalem - School of Public Policy ( email )

Mount Scopus
Jerusalem 91905
Israel
972-2-5883709 (Phone)
972-2-5880047 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Michel Strawczynski

Bank of Israel - Research Department ( email )

Bank of Israel Street
Jerusalem
Israel
972-2-6552601 (Phone)

Hebrew University of Jerusalem - Dept. of Economics

Mount Scopus
Jerusalem
Israel

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