Electoral Institutions, Cabinet Negotiations, and Budget Deficits within the European Union

CEPR Discussion Paper Series #1555

Posted: 15 Apr 1997

See all articles by Jürgen von Hagen

Jürgen von Hagen

University of Bonn - Institute of Economic Policy; Centre for Economic Policy Research (CEPR)

Mark Hallerberg

Emory University - Department of Political Science

Date Written: January 1997

Abstract

Two literatures in political economy argue that differences in political institutions help explain variation in the fiscal performance of countries. They identify electoral systems and institutions that structure the formation of the budget as important determinants of the budget deficit. In this paper we indicate that these two arguments complement one another. Electoral institutions matter because they restrict the type of budgetary institution a state has at its disposal to solve the coordination problem involved in the budget negotiations. The theory and the empirical results indicate a strong relationship between one-party governments and strong finance minister solutions on the one hand and multi-party or minority governments and the use of formal budget targets on the other. Pooled time series regression supports our contention that the presence of one of these budgetary institutions matters more than the plurality/ proportional representations dichotomy.

JEL Classification: H60, H61, H62, K40

Suggested Citation

von Hagen, Jürgen and Hallerberg, Mark, Electoral Institutions, Cabinet Negotiations, and Budget Deficits within the European Union (January 1997). CEPR Discussion Paper Series #1555, Available at SSRN: https://ssrn.com/abstract=4824

Jürgen Von Hagen (Contact Author)

University of Bonn - Institute of Economic Policy ( email )

Adenauerallee 24
D-53113 Bonn
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Mark Hallerberg

Emory University - Department of Political Science ( email )

Atlanta, GA 30322
United States

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