THE POLITICAL-ECONOMY OF DEFICIT SPENDING - A CROSS COMPARISON OF INDUSTRIALIZED DEMOCRACIES, 1955-90

The postwar deficit experiences of nine industrialized democracies are analyzed. The relative importance of three of the primary influences on a country's deficit which have been suggested in the literature: (1 ) the state of the country's economy, (2) the 'left-right' ideology of the party in power, and (3) the strength of the party in power (as ad vanced by Roubini and Sachs) are examined. The author also introduces and tests the importance of an additional potential influence based on institutional structure in which presidential, 'stable' parliamentary , and 'unstable' parliamentary systems are seen to provide different i ncentives regarding the deficit for key political actors. The argument s are tested on a pooled time-series cross-sectional data set involvin g two presidential systems (France and the United States), four relati vely stable parliamentary systems (Canada, Germany, Japan, and the Uni ted Kingdom), and three relatively unstable parliamentary systems (Den mark, Italy, and the Netherlands). The findings include: (a) strong ef fects of the state of a nation's economy on its deficit; (b) little sy stematic relationship between the ideology of the party in power and i ts deficit; and (c) the observation that increased control of the gove rnment leads to lower deficits in unstable parliamentary systems but l arger deficits in presidential systems, with stable parliamentary syst ems serving as an intermediate case. The findings are compared both wi th the author's theoretical refinement and with recent theoretical and empirical work by Roubini and Sachs.