David Dreyer Lassen

Fiscal Transparency, Political Parties, and Debt in OECD Countries

Many believe and argue that fiscal, or budgetary, transparency has large, positive effects on fiscal performance. However, the evidence linking transparency and fiscal policy outcomes is less compelling. To analyze the effects of fiscal transparency on public debt accumulation, we present a career-concerns model with political parties. This allows us to integrate as implications of a single model three hitherto-separate results in the literature on deficit and debt accumulation: that transparency decreases debt accumulation (at least by reducing an electoral cycle in deficits), that right-wing governments (at least for strategic reasons) tend to have higher deficits than left-wing governments, and that increasing political polarization increases debt accumulation. To test the predictions of the model, we construct a replicable index of fiscal transparency on 19-country OECD data. Simultaneous estimates of debt and transparency strongly confirm that a higher degree of fiscal transparency is associated with lower public debt and deficits, independent of controls for explanatory variables from other approaches.

The Effect of Information on Voter Turnout: Evidence from a Natural Experiment

Do better informed people vote more? Recent theories of voter turnout emphasize a positive effect of being informed on the propensity to vote, but the possibility of endogenous information acquisition makes estimation of causal effects difficult. I estimate the causal effects of being informed on voter turnout using unique data from a natural experiment Copenhagen referendum on decentralization of the city administration into fifteen city district councils. Four districts carried out a pilot project, exogenously making pilot city district voters more informed about the effects of decentralization. Empirical estimates based on survey data confirm a sizeable and statistically significant causal effect of being informed on the propensity to vote.

The Political Economy of Institutions and Corruption in American States

Theoretically, this paper draws on political agency theory to formulate hypotheses. Empirically, it shows that political institutions have a role in explaining the prevalence of political corruption in American states. In the states, a set of democracies where the rule of law is relatively well established and the confounding effects of differing electoral systems and regimes are absent, institutional variables relating to the openness of the political system inhibit corruption. That is, other things equal, the extent to which aspiring politicians can enter and gain financial backing, and to which voters can focus their votes on policies and thereby hold incumbent politicians accountable for policy outcomes and find substitutes for them if dissatisfied with those outcomes, reduce corruption as a general problem of agency. These institutional effects are estimated in the presence of controls for variables representing other approaches.

Fiscal Transparency, Gubernatorial Popularity, and the Scale of Government: Evidence from the States

We explore the effect of the transparency of fiscal institutions in government on the scale of government and gubernatorial approval using a formal model of accountability. We construct an index of fiscal transparency for the American states from detailed budgetary information. With cross-sectional data for 1986–95, we find that—on average and controlling for other factors—fiscal transparency increases both the scale of government and gubernatorial approval. Our results imply that more transparent fiscal institutions induce greater effort by politicians, to whom voters give higher job approval, on average. Voters also respond by entrusting greater resources to politicians where fiscal institutions are more transparent, leading to larger government.

Political and Judicial Checks on Corruption: Evidence from American State Governments

The paper investigates the effects of checks and balances on corruption. Within a presidential system, effective separation of powers is achieved under divided government, with the executive and legislative branches being controlled by different political parties. When government is unified, no effective separation exists even within a presidential system, but, we argue, can be partially restored by having an accountable judiciary. Our empirical findings show that divided government and elected, rather than appointed, state supreme court judges are associated with lower corruption and, furthermore, that the effect of an accountable judiciary is stronger under unified government, where government cannot control itself. The effect of an accountable judiciary seems to be driven primarily by judges chosen through direct elections, rather than those exposed to a retention vote following appointment.

The Causes of Fiscal Transparency: Evidence from the U.S. States

We use unique panel data on the evolution of transparent budget procedures in the U.S. states over the past three decades to explore the political and economic determinants of fiscal transparency. Our case studies and quantitative analysis suggest that both politics and fiscal policy outcomes influence the level of transparency. More equal political competition and power sharing are associated with both greater levels of and increases in fiscal transparency during the sample period. Political polarization and past fiscal conditions, in particular state government debt and budget imbalances, also appear to affect the level of transparency. Copyright 2006, International Monetary Fund

It Isn't Just about Greece: Domestic Politics, Transparency and Fiscal Gimmickry in Europe

This article analyzes the political origins of differences in adherence to the fiscal framework of the European Union (EU). It shows how incentives to use fiscal policy for electoral purposes and limited budget transparency at the national level, combined with the need to respond to fiscal rules at the supranational level, interact to systematically undermine the Economic and Monetary Union through the employment of fiscal gimmicks or creative accounting. It also explains in detail how national accounts were manipulated to produce electoral cycles that were under the radar of the EU budget surveillance system, and concludes with new perspectives on the changes to (and challenges for) euro area fiscal rules.

The Political Budget Cycle is Where You Can't See It: Transparency and Fiscal Manipulation

We investigate the effects of fiscal transparency and political polarization on the prevalence of electoral cycles in fiscal balance. The recent political economy literature on electoral cycles identifies such cycles mainly in weak and recent democracies. In contrast, we show, conditioning on a new index of institutional fiscal transparency, that electoral cycles in fiscal balance are a feature also of advanced industrialized economies. Using a sample of nineteen OECD countries in the 1990’s, we identify a persistent pattern of electoral cycles in low(er) transparency countries, while no such cycles can be observed in high(er) transparency countries. Furthermore, we find, in accordance with recent theory, that electoral cycles are larger in more politically polarized countries.

Strong Firms Lobby, Weak Firms Bribe: A Survey-Based Analysis of the Demand for Influence and Corruption

We use survey responses by firms to examine the firm-level determinants and effects of political influence, their perception of corruption and prevalence of bribe paying. We find that: (a) measures of political influence and corruption/bribes are uncorrelated at the firm level; (b) firms that are larger, older, exporting, government-owned, are widely held and/or have fewer competitors, have more political influence, perceive corruption to be less of a problem and pay bribes less often; (c) influence increases sales and government subsidies and in general makes the firm have a more positive view on the government. In sum, we show that strong firms use their influence to bend laws and regulations, whereas weak firms pay bribes to mitigate the costs of government intervention.

Enforcement and Public Corruption: Evidence from US States

We use high-quality panel data on corruption convictions, new panels of assistant U.S. attorneys and relative public sector wages, and careful attention to the consequences of modeling endogeneity to estimate the impact of prosecutorial resources on criminal convictions of those who undertake corrupt acts. Consistent with “system capacity” arguments, we find that greater prosecutor resources result in more convictions for corruption, other things equal. We find more limited, recent evidence for the deterrent effect of increased prosecutions. We control for and confirm in a panel context the effects of many previously identified correlates and causes of corruption. By explicitly determining the allocation of prosecutorial resources endogenously from past corruption convictions and political considerations, we show that this specification leads to larger estimates of the effect of resources on convictions. The results are robust to various ways of measuring the number of convictions as well as to various estimators.