Presidents and cabinets: the political determinants of fiscal behavior in Latin America

Abstract

What political factors drive fiscal behavior in Latin America's presidential democracies? This work seeks to identify the political determinants of the level of public spending and the primary balance of ten democratic regimes in Latin America between 1980 and 1998. We consider, besides the influence of traditional variables such as the government's ideological orientation and electoral cycle, the impact of other institutional and political aspects, such as the legislative strength of the president, ministerial stability, and the degree of centralization of budget institutions. Methodologically, the work is based on a pooled cross-section-time-series data analysis of 132 observations. Our main findings are that presidents supported by a strong party and leading a stable team of ministers-and ones more to the right on the political spectrum-had a negative impact on public spending and a positive effect on fiscal balance, and that the electoral cycle deteriorates the latter.