Executive Strength, Executive-Legislative Relations, and Budget Deficits

Abstract

Why do different countries experience varying levels of budget deficits? Common pool resource theorists argue that budget deficits tend to be low if the executive, who considers total tax burdens, suppresses the narrow incentives of individual legislators, who only consider partial tax burdens. Policy inertia theorists argue that a decrease in the number of veto players is associated with a low level of budget deficit. In this article, we combine the two approaches and offer a conditional common pool resource theory that predicts budget deficits to decrease as the executive strength vis-à-vis the legislature increases under parliamentarism because of the lack of legislative veto power. Under presidentialism, however, this effect is not likely to be significant because of the presence of legislative veto power. We support the argument through an analysis of cross-national data on budget deficits of 49 countries from 1995 to 2011.