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Fiscal Institutions
and Fiscal Performance
A National Bureau
of Economic Research
Conference Report
Fiscal Institutions
and Fiscal
Performance
Edited by
James M. Poterba and
Jurgen von Hagen
The University of Chicago Press
Chicago and London
JAMESM. POTERBA
is the Mitsui Professor of Economics at the Massachusetts Institute of Technology and director of the Public Economics Research Program at the National Bureau of Economic Research. JURCEN
VON HAGEN
is professor of economics at the University of Bonn, a director of the Zentrum fur Europaische Integrationsforschung (Center for European lntegration Studies) of the University of Bonn, and a fellow of the
Centre for Economic Policy Research, London.
The University of Chicago Press, Chicago 60637
The University of Chicago Press, Ltd., London
0 1999 by the National Bureau of Economic Research
All rights reserved. Published 1999
08 07 06 05 04 03 02 01 00 99 1 2 3 4 5
ISBN: 0-226-67623-4 (cloth)
Library of Congress Cataloging-in-Publication Data
Fiscal institutions and fiscal performance / edited by James M. Poterba
and Jiirgen von Hagen.
cm.+A National Bureau of Economic Research conferp.
ence report)
Includes bibliographical references and index.
ISBN 0-226-67623-4 (alk. paper)
2. Fiscal policy-Congresses.
1. Budget deficits-Congresses.
3. Deficit financing-Congresses.
1. Poterba, James M. 11. Hagen, Jurgen von. 111. Series: Conference report (National Bureau of
Economic Research)
HJ2005.FS67 1999
336.3-dc21
98-31598
CIP
Rev.
8The paper used in this publication meets the minimum requirements of
the American National Standard for Information Sciences-Permanence
of Paper for Printed Library Materials, ANSI 239.48-1992.
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Contents
Acknowledgments
ix
Introduction
James M. Poterba and Jurgen von Hagen
1
1.
Budget Deficits and Budget Institutions
Albert0 Alesina and Roberto Perotti
13
2.
A Model of Endogenous Fiscal Deficits and
Delayed Fiscal Reforms
Andrks Velasco
37
3.
Consumption Smoothing through Fiscal Policy
in OECD and EU Countries
Adriana Arreaza, Bent E. Sgrensen, and Oved Yosha
59
4.
Government Fragmentation and Fiscal Policy
Outcomes: Evidence from OECD Countries
Yianos Kontopoulos and Roberto Perotti
81
5.
Institutional Arrangements and Fiscal
Performance: The Latin American Experience
Ernesto Stein, Ernesto Talvi, and Alejandro Grisanti
6.
Politics, Institutions, and Public-Sector Spending
in the Argentine Provinces
Mark P. Jones, Pablo Sanguinetti, and
Mariano Tommasi
7.
Public Debt and Budgetary Procedures: Top
Down or Bottom Up? Some Evidence from
Swiss Municipalities
Lars P. Feld and Gebhard Kirchgassner
vii
103
135
151
viii
Contents
8.
State Fiscal Institutions and the U.S. Municipal
Bond Market
James M. Poterba and Kim Rueben
181
9.
Electoral Institutions, Cabinet Negotiations,
and Budget Deficits in the European Union
Mark Hallerberg and Jurgen von Hagen
209
10.
Budgetary Institutions and the Levels of
Expenditure Outcomes in Australia and
New Zealand
J. Edgardo Campos and Sanjay Pradhan
233
11.
Budgetary Procedures-Aspects and Changes:
New Evidence for Some European Countries
Jakob de Haan, Wim Moessen, and Bj@mVolkerink
265
12.
Subnational Budgetary and Stabilization
Policies in Canada and Australia
Thomas J. Courchene
301
13.
Coping with Fiscal Stress: Illusion and Reality
in Central Government Budgeting in Japan,
1975-1997
Maurice Wright
349
Contributors
377
Author Index
379
Subject Index
383