Fiscal Transparency, Gubernatorial Approval, and the Scale of Government: Evidence from the States

Abstract

We explore the effect of the transparency of fiscal institutions in government on the scale of government and gubernatorial approval using a formal model of accountability. We construct an index of fiscal transparency for the American states from detailed budgetary information. With cross-sectional data for 1986–95, we find that—on average and controlling for other factors—fiscal transparency increases both the scale of government and gubernatorial approval. Our results imply that more transparent fiscal institutions induce greater effort by politicians, to whom voters give higher job approval, on average. Voters also respond by entrusting greater resources to politicians where fiscal institutions are more transparent, leading to larger government.

The size and scope of government in the US states: does party ideology matter?

“…Besley and Case (1995) find that taxes and government spending was higher under Democratic governors even if the incumbent Democrat was ineligible for reelection because of term limits. Alt et al (2002) also find that Democratic governors collected higher general revenues and 1 Another reason for manipulating economic policies is electoral motives. We focus on the influence of party ideology and do not investigate electoral cycles.…”

“…Measuring party ideology consistently across time and space involves assessing the dimensionality of ideology, choosing a scale of ideology common to all units of observation, and in most cases making the implicit or explicit assumption that ideology is scale-invariant across time. Alt et al (2002), Frederiksson et al (2013) and Pickering and Rockey (2013) are notable exceptions that account for differences in party ideology across states and over time.…”

“…In particular, when exploring policy changes, situations with divided government would seem to exclude any partisan influences while unified governments would be more able to shift government spending, tax policy and institutional characteristics in ideological directions. Of the comparatively few studies to explore this situation, Alt and Lowry (1994) find that states with divided government respond differently to economic shocks than those with unified government (see also Lowry et al 1998, Alt et al 2002.…”

The Causes of Fiscal Transparency: Evidence in the Brazilian States

“…It involves ready access to reliable, comprehensive, timely, understandable, and internationally comparable information on government activities (...) so that the electorate and financial markets can accurately assess the government's financial position and the true costs and benefits of government activities, including their present and future economic and social implications. Alt et al (2002) emphasize that the most important aspects of fiscal transparency are commitment to a non--arbitrary language, the possibility of independent verification and the ability to access more information in fewer documents.…”

“…Seeking greater specificity in the conceptualization of fiscal transparency, the following section presents the transparency concept and the studies that indicate its possible causes. Alt, Lassen and Skilling (2002) argue that fiscal transparency refers to the informativeness, comprehensiveness and reliability of government budget statements. A commonly cited definition in studies on that theme is presented by Kopits and Craig (1998, p.1…”