Using a new dataset of Swiss cantons from 1890 to 2000, we estimate the causal effect of direct democracy on government spending. Our analysis is novel in two ways: first, we use fixed effects to control for unobserved heterogeneity; second, we combine a new instrument with fixed effects to...

We address the problem of how to investigate whether economics, or politics, or both, matter in the explanation of public policy. The problem is first posed in a particular context by uncovering a political business cycle (using Canadian data for 130 years) and by taking up the challenge to make...

How can the impact of aid be estimated in the presence of fungibility? And how far does fungibility reduce its benefits? These questions are analyzed in a context where a donor wants to target its efforts on a specific sector and specific geographic areas. A traditional...

The authors examine the role of governance-measured by level of corruption and quality of bureaucracy-and ask how it affects the relationship between public spending and outcomes. Their main innovation is to see if differences in efficacy of public spending can be explained by quality of...

We investigate empirically the effect of government purchases on unemployment in 20 OECD countries, for the period 1960-2007. Compared to earlier studies we use a data set with more variation in unemployment, and which allows for controlling for a host of factors that influence the effect of...

This paper investigates the impact of fiscal policy on profits using panel data for 19 high-income OECD countries during the period 1975-1999. We estimate a profit equation in which profits depend on a set of fiscal variables. Our empirical method is based on a consistent treatment of the...

This paper attempts to identify the effect of fiscal decentralization on public sector efficiency (PSE). We employ data envelopment analysis on a panel of 21 OECD countries over the period 1970-2000 to construct two alternative PSE indicators that reflect the governmental goals of economic...

The goal of this paper is to understand better, at the empirical level, how public spending contributes to growth by focusing on both the level and composition of public spending, in connection to the dynamics of GDP per capita growth. It attempts to answer two specific questions: (a) What are...

Scholars, policymakers, aid donors, and aid recipients acknowledge the importance of good governance for development. This understanding has spurred an intense interest in more refined, nuanced, and policy-relevant indicators of governance. In this paper we review progress to date in the area of...

This paper responds to the development policy debate involving the World Bank and the IMF on the use of fiscal policy not only for economic stabilization but also to promote economic growth and increase per capita income. A key issue in this debate relates to the effect of the composition of...