1 Introduction
2 Literature review2
3 Hypotheses
4 Data and model
4.1 The model
Method | Statistic | Prob.**
| Countries | Obs |
---|---|---|---|---|
Null: Unit root (assumes common unit root process) | ||||
Levin, Lin & Chu t∗
| −1.59 | 0.06 | 14 | 386 |
Null: Unit root (assumes individual unit root process) | ||||
Im, Pesaran and Shin W-stat | −2.70 | 0.00 | 14 | 386 |
ADF—Fisher Chi-square | 51.69 | 0.00 | 14 | 386 |
PP—Fisher Chi-square | 45.58 | 0.02 | 14 | 392 |
Null: No unit root (assumes common unit root process) | ||||
Hadri Z-stat | 7.22 | 0.00 | 14 | 406 |
4.2 Budgetary institutions
Country | Delegation index | Contracts index | ||||
---|---|---|---|---|---|---|
1991 | 2000 | 2004 | 1991 | 2000 | 2004 | |
Austria | 0.38 | 0.62 | 0.62 | 0.59 | 0.91 | 0.91 |
Belgium | 0.23 | 0.44 | 0.51 | 0.12 | 0.75 | 0.75 |
Denmark | 0.59 | 0.58 | 0.58 | 0.37 | 0.66 | 0.66 |
Finland | 0.37 | 0.52 | 0.52 | 0.59 | 0.69 | 0.69 |
France | 0.9 | 0.81 | 0.77 | 0.46 | 0.78 | 0.78 |
Germany | 0.58 | 0.62 | 0.62 | 0.77 | 0.73 | 0.73 |
Greece | 0.23 | 0.75 | 0.75 | 0.49 | 0.75 | 0.75 |
Ireland | 0.35 | 0.77 | 0.77 | 0.58 | 0.75 | 0.75 |
Italy | 0.27 | 0.73 | 0.69 | 0.34 | 0.66 | 0.66 |
Luxembourg | 0.53 | 0.64 | 0.64 | 0.25 | 1 | 1 |
Netherlands | 0.56 | 0.47 | 0.47 | 0.44 | 0.49 | 0.67 |
Portugal | 0.49 | 0.54 | 0.60 | 0.19 | 0.69 | 0.69 |
Spain | 0.27 | 0.58 | 0.58 | 0.23 | 0.53 | 0.53 |
Sweden | 0.32 | 0.71 | 0.71 | 0.03 | 0.69 | 0.69 |
UK | 0.74 | 0.87 | 0.87 | 0.52 | 0.74 | 0.74 |
Average | 0.45 | 0.64 | 0.65 | 0.40 | 0.73 | 0.74 |
4.3 Political variables
Budget balance | Government fragmentation | Max. ideological distance | Effective number of parties | # spending ministers | Economic growth | Government debt | Inflation | Security of property rights (EF) | End of communism (dummy) | Stability and growth pact (dummy) | |
---|---|---|---|---|---|---|---|---|---|---|---|
Budget balance | 1 | ||||||||||
Government fragmentation | 0.2498 | 1 | |||||||||
Max. ideological distance | 0.2879 | 0.8287 | 1 | ||||||||
Effective number of parties | 0.319 | 0.6407 | 0.7997 | 1 | |||||||
# spending ministers | −0.2865 | −0.2311 | −0.2101 | −0.1266 | 1 | ||||||
Economic growth | 0.152 | 0.0667 | 0.0612 | −0.1392 | −0.1441 | 1 | |||||
Government debt | 0.3357 | 0.0738 | 0.1844 | 0.4374 | −0.0108 | −0.0266 | 1 | ||||
Inflation | −0.414 | −0.1294 | −0.2433 | −0.2309 | 0.2606 | −0.1375 | −0.1076 | 1 | |||
Security of property rights (EF) | 0.1955 | 0.2217 | 0.3048 | 0.1939 | −0.3747 | 0.0849 | −0.2711 | −0.5516 | 1 | ||
End of communism (dummy) | 0.1948 | 0.01 | −0.0091 | −0.0229 | −0.0962 | −0.0993 | 0.1214 | −0.3043 | 0.3297 | 1 | |
Stability and growth pact (dummy) | 0.2876 | 0.1822 | 0.1815 | 0.1276 | −0.1051 | 0.0069 | 0.2869 | −0.177 | −0.0836 | 0.5771 | 1 |
5 Results
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
Lagged dependent variable | 0.698***
| 0.692***
| 0.679***
| 0.667***
|
(14.93) | (15.05) | (14.63) | (14.64) | |
Delegation | 1.083 | 0.615 | 0.454 | −2.526 |
(1.063) | (0.525) | (0.300) | (−1.109) | |
Government fragmentation | −0.381 | |||
(−1.250) | ||||
Government fragmentation*Delegation | 0.444 | |||
(0.807) | ||||
Maximum ideological distance | −0.525*
| |||
(−1.965) | ||||
Maximum ideological distance*Delegation | 0.600 | |||
(1.323) | ||||
Effective number of parties | −0.753**
| |||
(−2.010) | ||||
Effective number of parties*Delegation | 0.554 | |||
(0.978) | ||||
Number of spending ministers | −0.261***
| |||
(−2.894) | ||||
Number of spending ministers*Delegation | 0.188 | |||
(1.388) | ||||
Economic growth | 0.00221 | 0.00505 | −0.00619 | 0.0161 |
(0.0439) | (0.100) | (−0.129) | (0.327) | |
Government debt | 0.0292***
| 0.0288***
| 0.0313***
| 0.0282***
|
(3.964) | (3.876) | (4.193) | (3.713) | |
Inflation | 0.0707 | 0.0580 | 0.0652 | 0.0633 |
(1.227) | (0.970) | (1.113) | (1.143) | |
Stability and Growth Pact | 1.335***
| 1.309***
| 1.358***
| 1.315***
|
(4.155) | (4.001) | (4.137) | (4.079) | |
Fall of communism | −1.056***
| −1.054***
| −1.137***
| −1.146***
|
(−3.520) | (−3.564) | (−3.781) | (−3.778) | |
Institutional quality | 0.398**
| 0.406**
| 0.487**
| 0.532***
|
(2.137) | (2.215) | (2.536) | (2.943) | |
Constant | −5.468***
| −4.988**
| −5.067***
| −1.927 |
(−2.901) | (−2.575) | (−2.686) | (−0.828) | |
Observations | 252 | 252 | 252 | 252 |
Within R-squared | 0.719 | 0.722 | 0.725 | 0.728 |
Countries | 14 | 14 | 14 | 14 |
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
Lagged dependent variable | 0.689***
| 0.675***
| 0.682***
| 0.664***
|
(14.70) | (13.93) | (14.35) | (14.27) | |
Contracts | 0.411 | −0.179 | −0.159 | 1.105 |
(0.590) | (−0.222) | (−0.140) | (0.691) | |
Government fragmentation | −1.095**
| |||
(−2.392) | ||||
Government fragmentation*Contract | 1.500**
| |||
(2.229) | ||||
Maximum ideological distance | −0.870***
| |||
(−3.150) | ||||
Maximum ideological distance*Contract | 1.100***
| |||
(2.696) | ||||
Effective number of parties | −0.671**
| |||
(−2.414) | ||||
Effective number of parties*Contract | 0.524 | |||
(1.333) | ||||
Number of spending ministers | −0.157**
| |||
(−2.020) | ||||
Number of spending ministers*Contract | −0.00414 | |||
(−0.0403) | ||||
Economic growth | −0.00211 | 0.00621 | 0.00207 | 0.0158 |
(−0.0434) | (0.129) | (0.0425) | (0.322) | |
Government debt | 0.0307***
| 0.0314***
| 0.0317***
| 0.0319***
|
(4.229) | (4.429) | (4.391) | (4.341) | |
Inflation | 0.0529 | 0.0368 | 0.0455 | 0.0626 |
(1.025) | (0.708) | (0.850) | (1.211) | |
Stability and Growth Pact | 1.336***
| 1.255***
| 1.361***
| 1.334***
|
(4.154) | (3.893) | (4.140) | (4.145) | |
Fall of communism | −1.168***
| −1.171***
| −1.210***
| −1.232***
|
(−3.704) | (−3.709) | (−3.713) | (−3.818) | |
Institutional quality | 0.466**
| 0.511***
| 0.519**
| 0.504***
|
(2.453) | (2.643) | (2.586) | (2.728) | |
Constant | −5.556***
| −5.371***
| −5.095***
| −3.861*
|
(−3.125) | (−3.024) | (−2.848) | (−1.741) | |
Observations | 252 | 252 | 252 | 252 |
Within R-squared | 0.727 | 0.732 | 0.726 | 0.729 |
Countries | 14 | 14 | 14 | 14 |