Abstract
The term “political economy” has become ubiquitous in policy debates on public financial management (PFM) systems and their reform. Yet its definition or what exactly people mean when they use the term often remains unclear. There are many ways in which political economy has been theorized over time (Caporaso and Levine 1992). Some of these are particularly relevant for the purposes of this chapter and, more generally, for discussions around budgeting and the design of institutions devoted to the management of public finances. Broadly, we think of a political economy approach as a particular way of analyzing and interpreting economic phenomena that emphasizes the importance of political factors and vice versa. Its focus is on the different actors involved, their potentially conflicting interests and incentives, and the institutions that regulate their behavior, as well as the incentives that such institutions, in turn, may engender. More narrowly, an approach that is sometimes referred to as “positive political economy” or “political economics” has a formal and quantitative focus. The latter entails the application of methods and approaches from the discipline of economics, building on the tools of rational choice and game theory, to study the interrelationship between politics and economics (Alt and Chrystal 1983).
Keywords
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsPreview
Unable to display preview. Download preview PDF.
References
Alesina, A., and R. Perotti. 1996. “Fiscal Discipline and the Budget Process,” American Economic Review 86(2): 401–7.
Allen, R. 2009. “The Challenge of Reforming Budgetary Institutions in Developing Countries,” IMF Working Paper 09/96. Washington, DC: International Monetary Fund.
Alt, J. E., and K. A. Chrystal. 1983. Political Economics. Berkeley, CA: University of California Press.
Alt, J., D. D. Lassen and J. Wehner. 2012. “Moral Hazard in an Economic Union: Politics, Economics, and Fiscal Gimmickry in Europe,” Weatherhead Center for International Affairs Working Paper. Cambridge, MA: Harvard University.
Andrews, M. 2013. The Limits of Institutional Reform in Development: Changing Rules for Realistic Solutions. New York, NY: Cambridge University Press.
Andrews, M. 2010a. “Good Government Means Different Things in Different Countries,” Governance 23(1): 7–35.
Andrews, M. 2010b. “How Far Have Public Financial Management Reforms Come in Africa?,” HKS Faculty Research Working Paper Series RWP10–018. Cambridge, MA: Harvard Kennedy School.
Blöndal, J. R. 2001. “Budgeting in Sweden,” OECD Journal on Budgeting 1(1): 27–57.
Bozeman, B., and J. D. Straussman. 1982. “Shrinking Budgets and the Shrinkage of Budget Theory,” Public Administration Review 42(6): 509–15.
Bradbury, J. C., and M. W. Crain. 2001. “Legislative Organization and Government Spending: Cross-Country Evidence,” Journal of Public Economics 82(3): 309–25.
Brinkerhoff, D. W., and A. A. Goldsmith. 2005. “Institutional Dualism and International Development: A Revisionist Interpretation of Good Governance,” Administration and Society 37(2): 199–224.
Campos, E., and S. Pradhan. 1996. “Budgetary Institutions and Expenditure Outcomes: Binding Governments to Fiscal Performance,” World Bank Policy Research Working Paper 1646. Washington, DC: World Bank.
Caporaso, J. A., and D. P. Levine. 1992. Theories of Political Economy. New York: Cambridge University Press.
Congleton, R. D., and B. Swedenborg (eds) 2006. Democratic Constitutional Design and Public Policy: Analysis and Evidence. Cambridge, MA: MIT Press.
Davis, O. A., M. A. H. Dempster and A. Wildavsky. 1966. “A Theory of the Budgetary Process,” American Political Science Review 60(3): 529–47.
de Renzio, P., M. Andrews and Z. Mills. 2011. “Does Donor Support to Public Financial Management Reforms in Developing Countries Work? An Analytical Study of Quantitative Cross-country Evidence,” ODI Working Paper 329. London: Overseas Development Institute.
Diamond, J. 2012a. Guidance Note on Sequencing PFM Reforms. Available on the Internet: http//www.pefa.org.
Diamond, J. 2012b. Guidance Note on Sequencing PFM Reforms: Background Paper 1. Available on the Internet: http//www.pefa.org.
Eslava, M. 2011. “The Political Economy of Fiscal Deficits: A Survey,” Journal of Economic Surveys 25(4): 645–73.
Eurostat. 2004. “Report on the Revision of the Greek Government Deficit and Debt Figures,” November 22. Luxembourg: Eurostat.
Evans, P. 2004. “Development as Institutional Change: The Pitfalls of Monocropping and the Potentials of Deliberation,” Studies in Comparative International Development 38(4): 30–52.
Hallerberg, M., R. Strauch and J. von Hagen. 2009. Fiscal Governance in Europe. Cambridge: Cambridge University Press.
Hallerberg, M., and S. Yläoutinen. 2010. “Political Power, Fiscal Institutions and Budgetary Outcomes in Central and Eastern Europe,” Journal of Public Policy 30(1): 45–62.
Heclo, H., and A. Wildavsky. 1974. The Private Government of Public Money. London: Macmillan.
Heller, W. B. 1997. “Bicameralism and Budget Deficits: The Effect of Parliamentary Structure on Government Spending,” Legislative Studies Quarterly 22(4): 485–516.
IMF. 2009. “Republic of Latvia: Stand-by Arrangement – Aide-Mémoire,” Washington, DC: International Monetary Fund.
Key, V. O. 1940. “The Lack of a Budgetary Theory,” American Political Science Review 34(6): 1137–44.
Killick, T. 2005. “The Politics of Ghana’s Budgetary System,” CDD/ODI Policy Brief 2. London: Overseas Development Institute.
Koen, V., and P. Van den Noord. 2005. “Fiscal Gimmickry in Europe: One-Off Measures and Creative Accounting,” OECD Economics Department Working Paper No. 417. Paris: Organisation for Economic Co-operation and Development.
Kraan, D.-J., J. Wehner, J. Sheppard, V. Kostyleva and B. Duzler. 2009. “Budgeting in Latvia,” OECD Journal on Budgeting 9(3): 185–227.
Lassen, D. D. 2010. Fiscal Consolidations in Advanced Industrialized Democracies: Economics, Politics, and Governance. Stockholm: Finanspolitiska rådet.
Manning, N. 2001. “The Legacy of the New Public Management in Developing Countries,” International Review of Administrative Sciences 67(2): 297–312.
Milesi-Ferretti, G. M. 2003. “Good, Bad or Ugly? On the Effects of Fiscal Rules with Creative Accounting,” Journal of Public Economics 88 (1–2): 377–94.
Molander, P. 2001. “Budgeting Procedures and Democratic Ideals: An Evaluation of Swedish Reforms,” Journal of Public Policy 21(1): 23–52.
Musgrave, R. A. 1959. The Theory of Public Finance: A Study in Public Economy. New York: McGraw-Hill.
Niskanen, W. A. 1971. Bureaucracy and Representative Government. Chicago: Aldine Atherton.
Parry, R. 2003. “The Influence of Heclo and Wildavsky’s The Private Government of Public Money,” Public Policy and Administration 18(4): 3–19.
Persson, T., and G. E. Tabellini. 2000. Political Economics: Explaining Economic Policy. Cambridge, MA: MIT Press.
Persson, T., and G. E. Tabellini. 2003. The Economic Effects of Constitutions. Cambridge, MA: MIT Press.
Poterba, J. M., and J. von Hagen (eds) 1999. Fiscal Institutions and Fiscal Performance. Chicago: University of Chicago Press.
Rakner, L., L. Mukubvu, N. Ngwira, K. Smiddy and A. Schneider. 2004. The Budget as Theatre: The Formal and Informal Institutional Makings of the Budget Process in Malawi. Bergen: Christen Michelsen Institute.
Rubin, I. 1989. “Aaron Wildavsky and the Demise of Incrementalism,” Public Administration Review 49(1): 78–81.
Schick, A. 1966. “The Road to PPB: The Stages of Budget Reform,” Public Administration Review 26(4): 243–58.
Schick, A. 1988. “An Inquiry into the Possibility of a Budgetary Theory,” in I. Rubin (ed.) New Directions in Budget Theory, pp. 59–69. New York: State University of New York.
Schick, A. 1998. “Why Most Developing Countries Should Not Try New Zealand’s Reforms,” World Bank Research Observer 13(1): 123–31.
Stasavage, D., and D. Moyo. 2000. “Are Cash Budgets a Cure for Excess Fiscal Deficits (and at What Cost)?,” World Development 28(12): 2105–22.
Von Hagen, J. 1992. “Budgeting Procedures and Fiscal Performance in the European Communities,” European Economy – Economic Papers 96, Brussels: Directorate-General for Economic and Financial Affairs, Commission of the European Communities.
Von Hagen, J., and I. J. Harden. 1995. “Budget Processes and Commitment to Fiscal Discipline,” European Economic Review 39(3): 771–9.
Von Hagen, J., and G. B. Wolff. 2006. “What Do Deficits Tell Us about Debt? Empirical Evidence on Creative Accounting with Fiscal Rules in the EU,” Journal of Banking and Finance 30(12): 3259–79.
Wehner, J. 2007. “Budget Reform and Legislative Control in Sweden,” Journal of European Public Policy 14(2): 313–32.
Wehner, J. 2010. Legislatures and the Budget Process: The Myth of Fiscal Control. New York: Palgrave Macmillan.
Weingast, B. R., K. A. Shepsle, and C. Johnsen. 1981. “The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics,” Journal of Political Economy 89(4): 642–64.
Wildavsky, A. 1961. “Political Implications of Budgetary Reform,” Public Administration Review 21(4): 183–90.
Wildavsky, A. B. 1964. The Politics of the Budgetary Process. Boston: Little Brown.
Wildavsky, A. B. 1975. Budgeting: A Comparative Theory of Budgetary Processes. Boston: Little Brown.
World Bank. 1998. Public Expenditure Management Handbook. Washington, DC: World Bank.
Editor information
Copyright information
© 2013 Joachim Wehner and Paolo de Renzio
About this chapter
Cite this chapter
Wehner, J., de Renzio, P. (2013). Designing Fiscal Institutions: The Political Economy of PFM Reforms. In: Allen, R., Hemming, R., Potter, B.H. (eds) The International Handbook of Public Financial Management. Palgrave Macmillan, London. https://doi.org/10.1057/9781137315304_5
Download citation
DOI: https://doi.org/10.1057/9781137315304_5
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-33598-5
Online ISBN: 978-1-137-31530-4
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)