POLITICAL DETERMINANTS OF BUDGET DEFICITS - COALITION EFFECTS VERSUS MINORITY EFFECTS

This paper reexamines some recent empirical evidence on the hypothesis that institutional arrangements in the political process affect budget deficits. The results of Roubini and Sachs (1989b) are replicated, and sensitivity analysis indicate that their results are robust. However, the main conclusion of Roubini and Sachs, that coalition governments are less capable of budgetary discipline, needs to be modified. A reformulation of their variable representing political cohesion reveals that it captures the effects of minority governments rather than majority coalition governments. The data support the hypothesis that it is harder to negotiate in parliament than within a government. © 1991.