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ABSTRACT
Do political factors have any effect on fiscal policy and public spending in the post-communist Europe? We answer this question by using annual data for 15 Central and Eastern European democracies from 1992–2017. We look into several political variables: number of parties in the cabinet, partisan cycle (ideology), electoral cycle, and coalition type. We deploy fixed-effect estimates, showing that the peculiarities of a country explain a large part of the variance, thus validating the path dependency and incrementalism theses in public policy analysis. We find positive impact of the pre-electoral and electoral year on public spending, but no statistically significant support for other poitical determinats.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes on contributors
Dušan Pavlović is political economist. He is currently teaching political economy and public choice at the Faculty of political science, University of Belgrade. His areas of interest are political economy of democratic institutions, and rational and public choice theory. His latest book is about the consolidation of democracy in Serbia after 2000, and political economy of Serbia.
Miloš Bešić is associate professor at the Faculty of Political Science, University of Belgrade. He teaches sociology and methodology (with statistics). He is a national programme director of the European Value Survey. He published a number of articles and books in the following areas: post-communist society in transition, value orientations, social capital, and political culture.
Notes
1 In some studies, the electoral cycle is referred to as the political business cycle (Dubois Citation2016). We decided to stick to “electoral cycle” when we look into the effect of elections on deficit, and “partisan cycle” when we look into the effect of party ideology on elections.
2 For Freedom House’s categorisation, see: https://freedomhouse.org/report/nations-transit/nations-transit-2017 [Accessed 20 March 2018]. Freedom House categorises a country as a democracy if it has a score of 3.00-3.99. Other indices, such as the Economist Intelligence Unit’s index of democracy, are also useful. However, we use the FH index because it covers a greater number of years.
3 We omitted from the sample post-communist countries such as Armenia, Azerbaijan, Uzbekistan, Russia, Kazakhstan and other countries which, under the Nations in Transit’s classification, are categorised as semi- or consolidated authoritarian regimes.
4 A useful review of this theory and its subsequent modifications can be found in Alesina (Citation1988).
5 Other recent research contradicts this thesis, arguing that Western European cabinets frequently pursued anti-cyclical fiscal policies, in contrast to post-communist European countries (Baldi and Staehr Citation2016), and sometimes even get themselves re-elected (Karyotis and Rüdig Citation2015).
6 Barry Weingast examined the repercussions of what he called “pork-barrel politics,” claiming that a larger number of legislators will enlarge the number of budget projects that will benefit only those who can take advantage of them, at the expense of the rest of the population. This is also known as the 1/n thesis. Since the marginal cost of increasing spending is 1/n, where n is the number of legislators, the larger the n, the smaller the marginal cost for each project, and the larger the budget spending and the number of projects (Shepsle and Weingast Citation1981).
7 This argument is derived from the size principle formulated by Riker (Citation1962), who argues that parties will always form the minimal winning coalition. However, some recent research shows that between 1945 and 1999, European governments took various forms (Laver and Shepsle Citation1990, 71; Strøm and Nyblade Citation2007, 787), with a minimal winning coalition appearing only about one-third of the time. Previous studies on veto players (Persson and Tabellini Citation2003; Tsebelis Citation1995, Citation1999, Citation2002) have focused on the number of parties in a coalition, rather than what kind of multiparty coalition exists.
8 There were theoretical claims that more-than-minimal coalitions (surplus or oversized) tend to spend less because adding another member diminishes the leverage of each actor, thereby reducing each member’s impact on public spending. In such coalitions, “surplus majorities represent ‘insurance’ against unauthorised defections by factions and undisciplined parties” (Laver and Schofield Citation1990, 82). This means that any member can be dismissed from the cabinet without endangering its survival. The repercussions of the common pool resource problem, therefore, may be highly pronounced in both minority cabinets and MWCs, but not in surplus coalitions.
9 We saw that in the two previous cases, the structure of the situation is such that members cannot credibly commit to cooperation because everyone has an incentive to blackmail the others. One way to avoid this would be to add a surplus member as a kind of “insurance”. Carrubba and Volden (Citation2000, 262; Citation2004) argue that this leads to “minimum necessary coalitions,” which are basically oversized coalitions (larger than minimal winning coalitions).
10 We saw that in the two previous cases, the structure of the situation is such that members cannot credibly commit to cooperation because everyone has an incentive to blackmail the others. One way to avoid this would be to add a surplus member as a kind of “insurance”. Carrubba and Volden (Citation2000, 262; Citation2004) argue that this leads to “minimum necessary coalitions,” which are basically oversized coalitions (larger than minimal winning coalitions).
11 The authors’ political variables are divided in two: (a) political institutions and their veto capacity (for instance, constitutional court, president veto, citizen initiatives); (b) government strength under which the authors include parliamentary support, effective number of governing parties, and the ideological distance (Jahn and Muller-Rommer Citation2010).
12 The post-communist countries selected by Brender and Drazen (Citation2005) are: Bulgaria, Czech Republic, Estonia, Hungary, Lithuania, Poland, Slovak Republic, Romania, Russia and Slovenia. All Balkan countries are missing from the sample.
13 Their sample includes Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, and Serbia (Arsić, Nojković, and Ranđelović Citation2017).
14 Unfortunately, some other useful ideology datasets were of not much help. For instance, Comparative Political Dataset 1960–2016 by Armingeon et al. (Citation2018) also contains no data the ideological values for several Balkan countries (Albania, Montenegro, or Serbia).
15 The data for this variable are collected from Casal Bértoa. (Citation2018) http://www.parties-and-elections.eu/index.html (Accessed: 09/08/2018), and ParlGov database (Döring and Manow Citation2018).
16 This argument is derived from the size principle formulated by Riker (Citation1962), who argues that parties will always form the minimal winning coalition. However, some recent research shows that between 1945 and 1999, European governments took various forms (Laver and Shepsle Citation1990, 71; Strøm and Nyblade Citation2007, 787), with a minimal winning coalition appearing only about one-third of the time. Previous studies on veto players (Persson and Tabellini Citation2003; Tsebelis Citation1995, Citation1999, Citation2002) have focused on the number of parties in a coalition, rather than what kind of multiparty coalition exists.
17 The cabinet is the basic unit of observation in this research. We use the definition of cabinet advanced by Müller and Strøm (Citation2000, 11). We differentiate between a cabinet and a government: the latter is a broader notion that involves, apart from coalition partners, public servants and administrators who may or may not have direct links with the political parties that form the government. The cabinet is a much narrower term that encompasses only the representatives of political parties who support the government. For our analysis, the number of parties that make up the cabinet is the key factor.
18 We do not follow the six-fold typology that can be found in some other studies (Woldendorp, Keman, and Budge Citation1998, Citation2000; Müller-Rommel, Fettelschoss, and Harfst Citation2004), because we are interested in only three types of coalition—minority, minimal, or oversized.
19 The project was first introduced in Laver and Budge (Citation1992). We used the 2018 Manifesto Codebook.
20 In this way we also avoid the problem of the missing values for smaller cabinet members, which the Manifesto projects frequently suffers from.
21 GDP is given as a real percentage change expressed in constant prices. Unemployment rate is expressed as the percent of the total labour force.
22 Values for democracy score (DS) can be found at https://freedomhouse.org/report-types/nations-transit.
23 The Romanian example confirms that an excessive number of employees exist in public companies (Volintiru et al. Citation2017, 35).