Fiscal Transparency, Elections and Public Employment: Evidence from the OECD

Abstract

There is considerable variation in levels and changes in public employment within and between developed democracies. This article highlights the importance of fiscal transparency in determining changes in public employment. It argues that economic growth increases public employment under low fiscal transparency and that this effect is strongest in years of election. These hypotheses are tested on a panel of 20 OECD countries from 1995 to 2010. The analyses show substantial evidence in favor of the arguments. Fiscal transparency lowers the positive effect of growth on public employment, a relationship, which is most robust in election years.

Stepping up during Elections: Independent Central Banks and Inflation

“…6 We understand survival broadly, including both power retention by the ruler, personallyreelection -or by the ruler's party. 7 For example, in developed countries, there is evidence of an opportunistic cycle in fiscal policy (Alt andLassen 2006, Klomp andDe Haan 2013), public employment (Aaskoven 2016), and other policies (Alesina, et al 1997). In developing countries, there is evidence of electoral cycles in fiscal policy (Gonzalez 2002), privatizations (Lami, et al 2016), debt interest payments (Sáez 2016), and exchange rate regimes (Schuknecht 1999), among other policies (Ames 1987, Remmer 1993).…”

Partisan-Electoral Cycles in Public Employment: Evidence from Developed Democracies

“…Future research could expand and explore this combined partisan-opportunistic cycle further, and explore more dynamically the potential relationship between the ideological orientation of the government, electoral incentives and public policies. Given that the existence of electoral cycles in most developed democracies seems to be contingent on institutional, economic and political factors (Aaskoven, 2016; Alt and Lassen, 2006b; Klomp and De Haan, 2013), exploring which factors raise or depress this potential partisan-opportunistic electoral cycle in public employment, and other policy measures, could be an interesting area of research. Future research might also expand these issues to subnational units, such as municipalities and federal states.…”

“…However, the LABORSTA database only records general government public employment, and alternative sources of central government public employment data are not readily available for OECD countries over the studied time period. Furthermore, in most OECD countries, the central government should be able to both indirectly and sometimes even directly affect the level of public employment at the municipal, regional and even state level, through (targeted) intergovernmental grants, stricter or looser enforcement of subnational fiscal rules and targets (Aaskoven, 2016: 319), and even direct imposition/removal of subnational hiring freezes (Grembi et al, 2016: 6). 10 Consequently, the political ideology and/or electoral incentives of the central government should also be able to affect subnational employment levels.…”

“… 2. In a recent paper, Aaskoven (2016) also finds contingent electoral cycles in public employment in OECD countries. …”

Effects of Media Coverage on Budget Transparency in Croatian Local Administrative Units

“…Fiscal transparency and the transmission of budget/fiscal information are relevant in improving economic management and promoting fiscal stability (Heald, 2003;Sedmihradská & Haas, 2012). This also includes reducing the overstatement of benefits and understatement of the cost, i.e., reducing fiscal illusion (Afonso, 2014), reducing the magnitude of political budget cycles (Aaskoven, 2016, Alt & Lassen, 2006, decreasing the corruption and increasing government´s credit rating (Chen & Neshkova, 2018;de Simone et al, 2017), increasing the efficiency of public governance and spending (de Simone et al 2019;Montes, et al, 2019), and overall enhancing fiscal discipline (Jarmuzek, 2006;Wildowicz-Giegel & Kargol-Wasiluk, 2020).…”