Serbia: Fiscal consolidation: Program design and political economy issues

Political Economy of Fiscal Institutions

We discuss two essential problems of the political economy of public finances: The principal agent problem between voters and elected politicians and the common pool problem arising from the fact that money drawn from a general tax fund is used to pay for policies targeting more or less narrow groups in society. Three institutional mechanisms exist to deal with these problems, ex-ante rules con...

The political economy of fiscal policy: Survey

Fiscal Decentralization: A Political Economy Perspective

This paper surveys recent contributions to the study of fiscal decentralization which adopt a political economy approach. It is argued that this approach can capture, in a variety of formal models, the plausible and influential ideas (increasingly, supported by empirical evidence) that fiscal decentralization can lead to improved preference-matching and accountability of government. In particul...

Fiscal Composition and Aid Effectiveness A Political-Economy Model

In accounting for the rather gloomy trend of the aid effectiveness literature over the last few years, one explanatory strand has been fiscal, suggesting in particular that aid flows in weak states have tended to erode the taxbase and the structure of institutions. We pursue this idea, tracing the link from politics to domestic tax effort and then using the influence of this on expenditure to e...

Whither Political Economy ? Theories , Facts and Issues ∗

In this paper, I discuss recent developments in political economy. By focusing on the microeconomic side of the discipline, I present an overview of current research on four of the fundamental institutions of a political economy: voters, politicians, parties and governments. For each of these topics, I identify and discuss some of the salient questions that have been posed and addressed in the ...