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

Multiparty government and economic policy-making

“…Most empirical studies focus on the effect of electoral systems (see, e.g., instead of governmental characteristics. The studies that do focus on the role of government features have been based on rather crude variable specifications, for example, focusing only on the number of parties in cabinet (Hallerberg and von Hagen 1999;Bawn and Rosenbluth 2006), a simple dummy specifying if the government was a coalition (Persson et al 2007), or measuring minority status (Edin and Ohlsson 1991;Hallerberg and von Hagen 1999). Some studies have also measured government ''strength'' by combining several features into an index (Roubini and Sachs 1989;Borrelli and Royed 1995).…”

“…While initially the claim was that only the former provided for political stability and effective government, more recently the argument ties ''weak governments'' to lesser economic efficiency (slower growth rates, larger budget deficits, higher public debt, and so on). One proposed reason for such distortions is that coalition governments face more severe ''common pool problems'', since parties use their control over specific ministries to advance their specific spending priorities rather than practice budgetary discipline (e.g., Hallerberg and von Hagen 1999).…”

Political Preferences and the Aging of Populations

“…These decision makers represent different constituencies they care about and hence compete for their preferred public goods. In doing so, they fail to internalize the costs of their choices on current and future expenditures in terms of higher taxes needed for debt service and payments, which results in a deficit bias (see Weingast et al (1981); Persson and Tabellini (2006); Hallerberg and Hagen (1997); Tornell and Lane (1998);Velasco (1999Velasco ( , 2000; Krogstrup and Wyplosz (2006)). …”

“…With respect to fiscal policy, it has been shown theoretically and empirically that countries with majoritarian electoral rules spend less on public goods and have smaller governments than countries operating under proportional representation (see Lizzeri and Persico (2001);Milesi-Ferretti et al (2002); Tabellini (1999, 2003)). Some have also argued that the latter system is more likely to suffer from high government indebtedness, since it usually leads to coalition governments, which are prone to common pool dilemmas (see Hallerberg and Hagen (1997)). There indeed exist numerous empirical studies that investigate the impact of the number of coalition partners and legislative parties on the size of government deficits and debts (see Roubini and Sachs (1989) (2008)).…”

Front-Loaded or Back-Loaded Fiscal Adjustments: What Works in Emerging Market Economies?

“…Among the considerations identified are: The cabinet's ideology on fiscal policy Kontopoulus, 2002, andMulas-Granados, 2003); the electoral system and the budget process (Persson and Tabellini, 1999, Hallerberg and von Hagen, 1997, and von Hagen and others, 2001; and the proximity of elections (Alesina, Cohen, and Roubini, 1992, Maroto and Mulas-Granados, 2002, and Buti and van den Noord, 2003. Finally, the extent to which decision making in the budgetary process is fragmented, has also been widely considered (Roubini and Sachs, 1989;Grilli and others, 1991;and MulasGranados, 2003).…”