In literature, subnational governments have been identified as being prone to fiscal profligacy. In response to this problem, some countries choose to put a limit on the borrowing capacity of the state and local governments. This is notably the case for Malaysia with the enactment of Article 111...

The literature on estimating macroeconomic effects of fiscal policy requires suitable instruments to identify exogenous and unanticipated spending shocks. So far, the instrument of choice has been military build-ups. This instrument, however, largely limits the analysis to the US as few other...

The paper investigates the effects produced by the electoral system on expenditure composition by exploring the case of Italian regions over the period 1986-2009. Empirical analysis shows that the regional current expenditure transfers distributed to families and firms significantly decrease...

The Hungarian system of local governments is an important part of the public finance system. The share of the local government system within general government spending was around 20% in 2010 and is still 11–12% following the recent reallocation of responsibilities. From 2012 to date,...

In this paper we investigate how tightening fiscal constraints (e.g., through intergovernmental transfer cuts) can lead local governments to postpone investments’ payments. We first provide a simple model showing how local governments can use arrears to relax their short-run financial...

An examination of how increased turnover among legislators in the fifty U.S. states affects fiscal policy and economic growth finds that it makes legislators short-sighted. Turnover increases the size of government by increasing the shares of both total spending and taxes in income. In...

In 2009 Germany introduced a new fiscal rule in its Basic Law. It stipulates that the federal budget must be (structurally) close to balance from 2016 onwards and does not allow (structural) budget deficits in the Laender (states') budgets after 2019. While the already existing debt brakes at...

In certain respects, it seems expedient to describe a government as a homogeneous and self-interested entity, called ’Leviathan’. To optimize fiscal constraints, we need to know how powerful a Leviathan really is. This paper presents a new approach to measure the power of Leviathans. This...

We analyze federal systems of government in which local public policies are financed by general taxation. In a decentralized political system there is, in each region, a vote to elect a local representative while in a centralized political system a single representative is elected by a federal...

Using a panel of Italian regions over the period 1986-2004, the purpose of the paper is to analyse the effects produced by local electoral rule on expenditure composition. In line with the theoretical predictions, the estimation results show a robust and significant cut in broad-based regional...