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Project C5:
(formerly B3)

Fiscal institutions and reform preferences
 

Coordinators:

Prof. Dr. Eckhard Janeba / Prof. Dr. Friedrich Heinemann 


 Researchers:

Sebastian Blesse


Associate:

Pierre Boyer, Ph.D. / Dr. Mathias Dolls


 Duration:01.01.2018 - 31.12.2021


Summary

Our project is centered on the analysis of fiscal policy and governance institutions, using theoretical modeling, surveys of policy-makers and making use of the German Internet Panel. For the final SFB funding period we propose research along the following lines. First, we continue to work on fiscal reforms such as the constitutional debt brakes in Germany (“Schuldenbremse”) and the euro area (Fiscal Compact). The next SFB funding period 2018-2021 coincides with a crucial stage of the German debt brake, as the fiscal rule will take full effect for the states (“Länder”) from 2020 onwards. In the first and second SFB funding periods we conducted two surveys of all 16 German state parliaments about the desirability and likelihood of compliance with the debt brake. Building on this unique database we aim to complete a third round of state parliament surveys. This will allow us to measure the evolution of politicians’ fiscal expectations and preferences across the lagged implementation of a new constitutional rule from its legislation (2009) until its full effect (2020). The survey at state level will be complemented by debt brake-related online experiments with municipal politicians (mayors and council members). The politicians’ survey has been complemented in the second SFB term with a parallel data gathering through the German Internet Panel (GIP) on voter preferences and expectations on the same set of fiscal issues. A striking result from these studies is that the debt brake is attractive for voters as an abstract rule, but is disliked when it imposes specific costs on voters. Given that several German states will have to continue, or further strengthen their fiscal consolidation measures to reach a balanced budget in 2020, we plan to identify in the third SFB funding period how consolidation impacts voter support for the fiscal rule. In this context, we intend to further deepen our interdisciplinary interaction with Project C2 (Bräuninger, Debus, Lehrer) on issues of cross-border policy diffusion with respect to debt brake-related party positions in German states. In our second line of research we plan to expand our recent focus on the future of Europe. This has at least two dimensions: the role of government competencies at the European level and the possible reversal of the economic integration process, as exemplified by the Brexit decision in the UK. The main aim of our research is i) to understand conceptually how disintegration shocks affect fiscal and economic outcomes, ii) to develop theoretical models that can guide empirical analysis, and iii) to map how voters’ and policy-makers’ preferences and beliefs respond to actual instances of disintegration and de-globalization. Ultimately this line of research shall allow us to design reforms for the institutional structure at the European level. Specifically, we intend to extend the surveys of national parliaments in the EU that we began in the second phase with a simultaneous survey of the French Assemblée National and the German Bundestag. We also plan to target the highest federal layer by implementing a survey of the European Parliament. We will study national and European politicians’ preferences both with respect to European fiscal rules (i.e. the Fiscal Compact) and in relation to a possible redesign of EU competencies. Hereby, we plan to contribute to the reform debate about the future of Europe (e.g. Brexit, controversies on macro-economic policy mix for the euro area, etc.).