Fiscal restraints by advisors

Shun ichiro Bessho, Kimiko Terai

Research output: Contribution to journalArticle

Abstract

This study investigates the role of fiscal advisors in maintaining government fiscal discipline when the advisor's appointment is determined endogenously. Our theoretical model shows that an incumbent politician has an incentive to employ an external advisor as a commitment device for fiscal discipline before being aware of his own competence level. The advisor acts as a restraint on public expenditure, which works to control the incumbent politician's ex post overspending to buy votes. Our empirical analysis supports this hypothesis in the Japanese case where governments with directors from the central government tend to spend less.

Original languageEnglish
Pages (from-to)205-232
Number of pages28
JournalEconomics of Governance
Volume14
Issue number3
DOIs
Publication statusPublished - 2013 Aug 1

Keywords

  • Delegation of policy making
  • Fiscal restraints
  • Personnel interchange
  • Re-election

ASJC Scopus subject areas

  • Business and International Management
  • Economics, Econometrics and Finance(all)

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