1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

The Political Economy of Fiscal Consolidation

This paper explores the political economy of fiscal adjustment. It begins with an examination of the evidence for, and sources of, ‘deficit bias’, including political and governance factors, public attitudes, the role of financial markets and imprecision about which debt targets should be pursued. It then examines the evidence regarding the exogenous and policy-related factors which affect the success of fiscal consolidation efforts. This is followed by a discussion of the role of fiscal institutions, including fiscal rules and autonomous agencies. The final section considers how the political economy of fiscal policy has changed with the financial crisis, giving some indications as to what may be needed to re-establish a consolidation path and make it less prone to setbacks.

English

Keywords: public expenditure, institutions, deficit, debt, taxation, fiscal policy, fiscal sustainability, budgets, fiscal consolidation, political economy
JEL: E65: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Studies of Particular Policy Episodes; E62: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Fiscal Policy; H30: Public Economics / Fiscal Policies and Behavior of Economic Agents / Fiscal Policies and Behavior of Economic Agents: General; H60: Public Economics / National Budget, Deficit, and Debt / National Budget, Deficit, and Debt: General; H63: Public Economics / National Budget, Deficit, and Debt / National Debt; Debt Management; Sovereign Debt; H62: Public Economics / National Budget, Deficit, and Debt / National Deficit; Surplus; H61: Public Economics / National Budget, Deficit, and Debt / National Budget; Budget Systems
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