Details
| Original language | English |
|---|---|
| Article number | 102093 |
| Journal | European Journal of Political Economy |
| Volume | 72 |
| Early online date | 11 Aug 2021 |
| Publication status | Published - Mar 2022 |
| Externally published | Yes |
Abstract
We analyze politicians’ expectations about future compliance with a fiscal rule, and in particular the dependence of the expectations on their role in parliament (opposition vs. incumbent government coalition). We study this in the context of the German debt brake, which became a constitutional provision in 2009 but is binding for the sub-national states from 2020 onwards only. Via a unique survey, we analyze compliance expectations of parliamentarians of all 16 German state parliaments. A strong incumbency effect is identified from parliamentarians who move in and out of government, showing that politicians from the governing coalition are more optimistic than those from the opposition. A negative fiscal shock has little effects on the former, but a strongly negative one on the latter. We offer a theoretical model that is consistent with an increasing incumbency effect over time, as the result of wishful thinking by politicians concerning their reelection chances and a dynamic reputation effect for policymakers when compliance with the fiscal rule is achieved.
Keywords
- Fiscal policy, Fiscal rules, Incumbency, Political economy
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
- Social Sciences(all)
- Political Science and International Relations
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In: European Journal of Political Economy, Vol. 72, 102093, 03.2022.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Incumbency and expectations of fiscal rule compliance
T2 - Evidence from surveys of German policy makers
AU - Heinemann, Friedrich
AU - Janeba, Eckhard
AU - Todtenhaupt, Maximilian
PY - 2022/3
Y1 - 2022/3
N2 - We analyze politicians’ expectations about future compliance with a fiscal rule, and in particular the dependence of the expectations on their role in parliament (opposition vs. incumbent government coalition). We study this in the context of the German debt brake, which became a constitutional provision in 2009 but is binding for the sub-national states from 2020 onwards only. Via a unique survey, we analyze compliance expectations of parliamentarians of all 16 German state parliaments. A strong incumbency effect is identified from parliamentarians who move in and out of government, showing that politicians from the governing coalition are more optimistic than those from the opposition. A negative fiscal shock has little effects on the former, but a strongly negative one on the latter. We offer a theoretical model that is consistent with an increasing incumbency effect over time, as the result of wishful thinking by politicians concerning their reelection chances and a dynamic reputation effect for policymakers when compliance with the fiscal rule is achieved.
AB - We analyze politicians’ expectations about future compliance with a fiscal rule, and in particular the dependence of the expectations on their role in parliament (opposition vs. incumbent government coalition). We study this in the context of the German debt brake, which became a constitutional provision in 2009 but is binding for the sub-national states from 2020 onwards only. Via a unique survey, we analyze compliance expectations of parliamentarians of all 16 German state parliaments. A strong incumbency effect is identified from parliamentarians who move in and out of government, showing that politicians from the governing coalition are more optimistic than those from the opposition. A negative fiscal shock has little effects on the former, but a strongly negative one on the latter. We offer a theoretical model that is consistent with an increasing incumbency effect over time, as the result of wishful thinking by politicians concerning their reelection chances and a dynamic reputation effect for policymakers when compliance with the fiscal rule is achieved.
KW - Fiscal policy
KW - Fiscal rules
KW - Incumbency
KW - Political economy
UR - http://www.scopus.com/inward/record.url?scp=85113316126&partnerID=8YFLogxK
U2 - 10.1016/j.ejpoleco.2021.102093
DO - 10.1016/j.ejpoleco.2021.102093
M3 - Article
AN - SCOPUS:85113316126
VL - 72
JO - European Journal of Political Economy
JF - European Journal of Political Economy
SN - 0176-2680
M1 - 102093
ER -