The Creation of the Fiscal Council in Estonia: Exploring the Explanations for Its Institutional Design

Abstract

In this paper, we explore the creation of the fiscal council (FC) in Estonia, using the perspectives of different strands of institutionalism. Our analysis shows that the institutional design of the FC was influenced, in tandem, by principal-agent considerations, transaction costs, existing institutional configurations, path dependence, and normative concerns of the bureaucratic agents in charge of creating the new body. We conclude that in order to understand and explain the motives and factors involved in institutional design, the explanatory angles provided by rational choice, historical and sociological institutionalism should be viewed as complementary rather than contradictory.

The Punjab Revenue Authority: Meeting the challenges of a new institution

“…The HI approach would argue that the main obstacle to establishing a new institution is path dependence, and SI would point to difficulties in changing the existing norms. (Peters, 1999;Hope & Raudla, 2012;Koning, 2016;Raudla et al, 2018). We examine these challenges more closely below.…”

“…As stated above, institutionalist research has focused primarily on how institutions “constrain” behavior, paying less attention to how actors actually create or launch institutions (Olsen, ; Peters, ; Raudla, Keel, & Pajussaar, ; Thelen, ). The existing body of institutionalist literature, however, can provide some theoretical insights about what kind of challenges actors are likely to face when trying to find a new institution.…”

The European Union as a Trigger of Discursive Change: The Impact of the Structural Deficit Rule in Estonia and Latvia

“…In Estonia and Latvia, the estimations of the EC have differed from those of their respective MoFs, which, in turn, has led to discussions over why these computations diverge. The Fiscal Compact also required the members of the Eurozone to establish independent fiscal councils, which evaluate the compliance with the structural deficit target -adding a further actor to participate in the coordinative discourse over fiscal policy (Raudla et al 2018). In addition, the complexities involved in calculating the structural budget position have enhanced the role and the power of the finance ministries in the coordinative fiscal policy discourse in both countries.…”