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    • Thus budgetary institutions can broaden or restrict these in

    2018-10-25

    Thus, budgetary institutions can broaden or restrict these incentives, which lead to different fiscal results with respect to the size of the budget, its composition and the form of funding. In particular, budgetary institutions that moreover centralise the decision-making process tend to reduce the problem of the common pool and produce better fiscal results. Transparency and control tend to mitigate the principal-agent problem. Budget institutions can be divided into two types: the procedural rules relating to the budget preparation, approval and execution and the numerical fiscal targets, such as the balanced-budget rule. Alesina and Perotti (1996) argue that the balanced-budget rule is a neither necessary nor sufficient condition to ensure fiscal discipline. For the authors, the procedural rules, in particular, the rules for voting and approval of the budget and the degree of transparency are the crucial points. Among the voting rules, the sequence of voting on the budget project and the type of amendments rules allowed in the legislative discussion stand out. Thus, the procedures that first determine the voting on budget size and then its composition, the rules that limit the ability of the Legislature to propose amendments and the rules that require disclosure of the information concerning the preparation and execution of the budget tend to promote fiscal discipline. These institutions, as well as the others that limit the democratic accountability in the budget process, are classified as hierarchical by the authors. On the opposite side are the collegial institutions. Von Hagen (1992) and Von Hagen and Harden (1994) consider that centralised institutions, i.e., institutions that concentrate on the Executive branch the power to decide on the budget, ensure a lower deficit and debt level for the government. Among these institutions, the following features are noteworthy: in the preparation phase of the budget, the highest prerogative of the Minister of Finance in relation to other ministers to set the amount of the budget expenditure; in the voting phase, the rules that restrict legislative amendments and the agenda-setting, which gives the Executive the power to influence the voting process; and in the execution phase, the degree of control of the Minister of Finance on the expenses performed. Several empirical works on developed and developing countries present evidence that more hierarchical/centralised and more transparent budgetary institutions result in greater fiscal discipline. These works include those of Von Hagen (1992) and Von Hagen and Harden (1994), for EU countries, Alt and Lowry (1994) for the U.S. states, Alesina et al. (1999), Filc and Scartascini (2004) and Stein et al. (1988), for Latin America, Gleich (2003) for eastern European countries and Dabla-Norris et al. (2010) for low- and middle-income countries. With the exception of Alt and Lowry (1994), in all the other studies mentioned, the evaluation of the effect of budget institutions on the fiscal result and government debt was based on the comparison of institutions of different countries through the construction of budget indices. In general, these indices are constructed from a questionnaire, which covers the different institutional features in the preparation, approval and execution phases of the budget, in which scores are assigned to each feature, with the highest value being related to the more hierarchical/centralised institution. These scores are then aggregated using a formula, which can be the simple sum of the assigned values or their average. Regarding the national literature, there is no knowledge to date of studies for Brazil that seek to evaluate the effect of budgetary institutions on the federal fiscal result based on these indices and for the period considered here. Barroso (2003) uses the budget indices of Alesina et al. (1999), Campos and Pradhan (1996) and Esfahani (2000) for the post-1988 Constitution period of the Brazilian budget process but with a different proposal: the author\'s goal is to evaluate the resulting institutional framework if the institutional changes proposed by the author were to be adopted. Thus, the present study advances in an area little explored by the Brazilian literature.