Fiscal Deficits and the Political Survival of Finance Ministers across Regimes

• In Event: Institutional Performance and Policy Effectiveness across Regimes

Abstract

All governments run on money or do not run at all. But does the political survival of governments' main money procurers and accountants - their finance ministers - also depend on their ability to raise money for the government, and is all money good money? In this article, we show that the answer depends on the regime type. While the survival of finance ministers across democracies and dictatorships depends on their ability to raise revenue for the government, they need to tap into different sources of money. Specifically, finance ministers in autocracies can prolong their careers by accessing credit markets to live on borrowed money. By contrast, finance ministers in democracies need to access other sources of money, and are more likely to be removed from office if they resort to increased borrowing. We argue that this reflects fundamental differences in the institutional constraints and time-horizons of democratic and autocratic incumbents. We support our claims using a novel dataset, WhoGov, which contains individual-level data on cabinet members across the world's countries from 1966 until 2021 , and combine it with IMF fiscal data. Our findings have important implications for the political economy of regime types, and indicate that democracies and autocracies run on different types of revenue, and that democracies are better at providing their top-officials with personal incentives to care for sustainable budgets.

Authors

• Lasse Aaskoven, University of Southern Denmark

• Jonas Willibald Schmid, Stockholm University