Governing Fiscal Commons in the Enlarged EU

This study explores the achievements of the acceding countries in the sphere of procedural fiscal rules (labeled as fiscal governance). The primary goal is to answer two questions: what is the current state of fiscal governance in the “novice” EU comparing to the “old” EU-15? Can we prescribe the acceding states any country-specific fiscal procedures? Three major sections of the study aim at three different issues. Section 2 reviews the rationale for fiscal governance, and the main focus draws upon the common-pool problem. The next section reviews methods to find the fiscal governance suitable for countries with differing political environments. Next, observed fiscal governance is reported by means of indices from survey data gathered in May-June 2004. Group by group, the author compares the observations with what has been measured for EU-15 countries. The findings reveal the existence of groups of countries with similar characteristics and similar institutional potential.fiscal governance; fiscal rules; political fragmentation

Unifying EU Representation at the IMF Executive Board

The consequences of consolidating EU representation at the IMF Executive Board by regrouping the 27 Member States into two EU constituencies, euro area and non-euro area, are discussed. In particular we contrast voting power as proposed by Penrose-Banzhaf (PBI) and Shapley-Shubik (SSI), and other respectively related measures of blocking (or veto) power and decision efficiency as proposed by Coleman and Paterson. Hitherto, IMF-specific literature is PBI-based. However, theoretical reasons and empirical plausibility arguments for the SSI are compelling. The (SSI) voting power of the two large constituencies – U.S.A. and euro area – reflects their corresponding voting shares over a range of majority thresholds, whereas PBI voting power reduces to only half of vote share at the majority threshold of 85% needed for some Executive Board decisions. SSI-related estimates of veto power are generally lower than the Coleman indices. Correspondingly, the efficiency of collective decision-making is considerably underestimated by the Coleman measure;International Monetary Fund, European Union, Voting power analysis, Veto power

Population Monotonic Path Schemes for Simple Games

A path scheme for a simple game is composed of a path, i.e., a sequence of coalitions that is formed during the coalition formation process and a scheme, i.e., a payoff vector for each coalition in the path.A path scheme is called population monotonic if a player's payoff does not decrease as the path coalition grows.In this study, we focus on Shapley path schemes of simple games in which for every path coalition the Shapley value of the associated subgame provides the allocation at hand.We show that a simple game allows for population monotonic Shapley path schemes if and only if the game is balanced.Moreover, the Shapley path scheme of a specific path is population monotonic if and only if the first winning coalition that is formed along the path contains every minimal winning coalition.Extensions of these results to other probabilistic values are discussed

Executive authority, the personal vote, and budget discipline in Latin American and Carribean countries

Recent scholarship on the impact of fiscal institutions on budgeting outcomes in Latin American and Caribbean (LAC) countries indicates that political institutions impact the level of budget discipline. BuiIding upon this previous research, we argue that the principle problem that must be addressed to insure strong fiscal discipline is the common pool resource (CPR) problem. The source of the problem, as well as its solution, differ in the government and in the legislature. At the cabinet level, the CPR problem arises because ministers consider the spending and tax implications of decisions on their ministries (only) instead of on the general population. As Hallerberg and von Hagen (1999) indicate, the appropriate solution at the cabinet level depends upon the coalition structure of the government. Given that all LAC countries have either presidential or oneparty parliamentary systems, a strong central player like the finance minister can reduce the CPR problem at the cabinet level. A similar strengthening of the executive vis-à-vis the legislature, in contrast, does not necessarily lead to tighter fiscal discipline. The level of the CPR problem in the legislature depends upon the type of electoral system. If states have open list proportional representation systems, then increases in district magnitude increase the problem, while under closed lists increases in district magnitude decrease the problem. Using a data set of LAC countries for the period 1988-97 and following Carey and Shugart (1995), we create an index for the incentives for the personal vote. We find that executive power in the budget process is most effective in reducing budget deficits when the personal vote is high in the legislature, while strengthening the president (or prime minister) in countries where the personal vote is low in the legislature has no statistically significant effect. This finding has practical implications for the design of fiscal institutions in LAC countries—granting the executive a privileged position vis-à-vis the legislature has beneficial effects on the budget balance only when the CPR problem in the legislature is large. Moreover, an alternative institutional change is to reform a country’s electoral system. The second option may be more feasible in countries where legislators are unlikely to give the president more power, or where dictatorial pasts make populations wary of granting the executive too much authority on any policy area. --

Budget Institutions in the Euro Area Quality of budget institutions, legislative budgetary power and implications for fiscal discipline

This study assesses the quality of national budget institutions and legislative budgetary power in the Euro Area (EA) and examines their implications on fiscal discipline. Following the sovereign debt crises, common EA requirements have been introduced for national budget institutions, most notably for fiscal rules and independent fiscal councils. Meanwhile, the legislature has a key role to ensure that budgetary decisions are democratically legitimate, but strong legislative budgetary power is generally associated with less fiscal restraint. Two comprehensive composite indices are produced, based on recent data which captures reforms implemented after the Crisis. The findings show that overall, budget institutions in the EA are of medium quality, whilst legislative budgetary power is weak. Notwithstanding the thrust for a ‘one-size-fits-all’ approach, the specific characteristics of budget institutions differ considerably among the EA countries. Furthermore, results from a two-way fixed effects panel model for 2006-2015 show a positive relationship between the quality of budget institutions and the budget balance, but, in contrast to previous studies, the effect is rather weak. Being supra-nationally mandated, recent reforms to budget institutions in EA member states may suffer from a lack of ownership, thus impinging on their effectiveness to instil fiscal discipline. A qualitative case study on Malta provides further insight into the limitations of centrally-mandated institutional reforms. Finally, the findings suggest that stronger legislative budgetary power does not necessarily jeopardise fiscal discipline, if this involves a broad role of the legislature in the budgetary process, beyond amendment powers

Social capital, institutional structures, and democratic performance: A comparative study of German local governments

A great deal of attention has been given recently to the political culture approach in the form of Putnam's argument regarding the importance of social capital in shaping performance in both the political and economic systems. One implication that can be drawn from his study of Italian regional governments is that in the absence of large stocks of social capital, governmental institutions cannot be constructed that would afford superior democratic performance. While entertaining the hypothesis that social capital contributes to government performance, this paper also argues that institutional differences in government forms doplayan important role in shaping the levels of citizen satisfaction with their governments. In particular, it is argued that by minimizing the number of potential veto players within the institutional structure of the government decision making system, performance can be heightened. Drawing mainly on data from two surveys (of elites and citizens) in a large number of German communities conducted during 1995, an assessment of the cultural and institutional hypotheses is carried out. The results suggest that social capital (at least that manifested within local elite political culture) does contribute to better performance. In addition, regardless of the level of social capital that marks a community, governmental performance is enhanced through institutional structures that lower or minimize the number of veto players. -- Dem Politischen-Kultur-Ansatz wird derzeit durch Putnams Argument der Bedeutung des Sozialkapita1s bei der Gestaltung der Performanz politischer und ökonomischer Systeme große Aufmerksamkeit gewidmet. Als eine Implikation aus seiner Untersuchung der Regionalregierungen in Italien kann angenommen werden, daß bei nicht vorhandenem Sozialkapital keine staatlichen Institutionen geschaffen werden können, die eine bessere demokratische Performanz bieten könnten. Der Hypothese, daß Sozialkapital zur Regierungsperformanz beiträgt, folgend, wird in dem vorliegenden Papier argumentiert, daß institutionelle Unterschiede in den Regierungsformen doch eine wichtige Rolle bei der Bestimmung des Grades der Zufriedenheit der Bürger mit ihren Regierungen spielen. Speziell wird nachgewiesen, daß durch eine Minimierung der Anzahl potentieller Vetoakteure innerhalb der institutionellen Struktur des Entscheidungssystems der Regierung die Performanz erhöht werden kann. Unter Nutzung der Daten aus zwei Umfragen (Eliten und Bürger), die 1995 in einer großen Anzahl deutscher Gemeinden durchgeführt wurden, wird eine Einschätzung der kulturellen und institutionellen Hypothesen vorgenommen. Die Ergebnisse legen nahe, daß das Sozialkapital (zumindest jenes, welches sich in der politischen Kultur der lokalen Eliten manifestiert hat) wirklich zu einer besseren Performanz beiträgt. Darüber hinaus wird die Regierungsperformanz - ungeachtet des Niveaus des Sozialkapitals, das die spezielle Gemeinde auszeichnet - durch institutionelle Strukturen verbessert, die die Zahl der Vetoakteure verringern bzw. minimieren.

Swiss Consensus Democracy in Transition: A Re-analysis of Lijphart's Concept of Democracy for Switzerland from 1997 to 2007

The present article addresses the question of whether Switzerland can continue to be seen as an extreme case of federal consensus democracy, as illustrated by Arend Lijphart (1999). A re-analysis of Lijphart's (1999) study of the Swiss political system from 1997 to 2007 clearly demonstrates that due to recent political-institutional changes (a decreasing number of parties, growing electoral disproportionality, increasing decentralization and deregulation of the relationship between the state and interest groups), a consensus democracy with strong tendencies toward adjustment and normalization of the original exceptional Swiss case to meet the rest of the continental European consensus democracies has emerged. This development has been further strengthened by intensified public political contestation, rising polarization between the political camps in parliament, and the weakening of the cooperative search for consensus as the dominant mode of negotiation within the government. From the perspective of international comparison, Switzerland can thus be seen henceforth as a typical example, not an extreme case, of consensus democrac

Manipulation by Merging and Annexation in Weighted Voting Games

The problem of manipulation in voting is fundamental and has received attention in recent research in game theory. In this paper, we consider two cases of manipulation in weighted voting games done by merging of coalitions into single players and by annexation of a part or all of the voting weights of another player viewed from two perspectives: of the effect of swings of players and of the role of the Banzhaf power index. We prove two theorems for manipulation by merging and annexation, and show several attractive properties in these two processes. ACM Computing Classification System (1998): J.4, I.2.1

Representing Different Constituencies: Electoral Rules in Bicameral Systems in Latin America and Their Impact on Political Representation

This article analyzes the quantitative (mechanical) effects and qualitative (perceptions) effects on political representation of the election of two separate chambers in Latin America’s bicameral systems. After discussing the spread and strength of bicameralism in Latin America, we compare the different electoral systems for lower chambers and Senates. Our study shows that in a region characterized by relatively high levels of malapportionment in the first chamber, the second chamber reinforces the malapportionment in parliament. Representation tends to be much more disproportional in the upper chamber than in the lower house. Moreover, the differences in the electoral systems and district magnitudes for both chambers make it more difficult for women to win a seat in the Senate.Latin America, Senates, bicameralism, electoral systems, malapportionment, gender quota

Regulation and competition in German banking: an assessment

In Germany a public discussion on the "power of banks" has been going on for decades now with power having at least two meanings. On the one hand it is the power of banks to control public corporations through direct shareholdings or the exercise of proxy votes - this is the power of banks in corporate control. On the other hand it is market power - due to imperfect competition in markets for financial services - that banks exercise vis-à-vis their loan and deposit customers. In the past, bank regulation has often been blamed to undermine competition and the working of market forces in the financial industry for the sake of soundness and stability of financial services firms. This chapter tries to shed some light on the historical development and current state of bank regulation in Germany. In so doing it tries to embed the analysis of bank regulation into a more general industrial organisation framework. For every regulated industry, competition and regulation are deeply interrelated as most regulatory institutions - even if they do not explicitly address the competitiveness of the market - either affect market structure or conduct. This paper tries to uncover some of the specific relationships between monetary policy, government interference and bank regulation on the one hand and bank market structure and economic performance on the other. In so doing we hope to point to several areas for fruitful research in the future. While our focus is on Germany, some of the questions that we raise and some of our insights might also be applicable to banking systems elsewhere. Revised version forthcoming in "The German Financial System", edited by Jan P. Krahnen and Reinhard H. Schmidt, Oxford University Press