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Spending Growth With Vertical Fiscal Imbalance: Decentralized Government Spending In Norway, 1880–1990
Author(s) -
Borge Lars–Erik,
Rattsø Jørn
Publication year - 2002
Publication title -
economics and politics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.822
H-Index - 45
eISSN - 1468-0343
pISSN - 0954-1985
DOI - 10.1111/1468-0343.00111
Subject(s) - parliament , economics , government spending , politics , herfindahl index , index (typography) , fiscal policy , fragmentation (computing) , democracy , government (linguistics) , public economics , economic policy , monetary economics , market economy , political science , microeconomics , linguistics , philosophy , world wide web , computer science , welfare , law , operating system
Vertical fiscal imbalance, decentralized responsibility of spending with centralized financing, creates a common pool problem with spending pressure towards central funds. A model of decentralized government spending under vertical fiscal imbalance is developed, and the importance of national political characteristics for internalization of costs and spending level is investigated in an econometric analysis of Norway during 1880–1990. We argue that in a parliamentary democracy, the internalization of costs is influenced by the party fragmentation of parliament. This is confirmed by the econometric analysis using a Herfindahl index as a measure of fragmentation and political strength.