Who Decides the Budget?: A Political Economy Analysis of the Budget Process in Latin America

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The budget is the main tool used to allocate scarce public resources, and it is in the context of the budget process that politicians must make trade-offs between different policy priorities. The characteristics of the budget process determine not only the sustainability of fiscal accounts but also their adaptability, efficiency, and representativeness. This volume describes the budget practices, both formal and informal, in ten countries of Latin America and explains fiscal results in terms of these four features. The country studies identify the actors involved in budget policymaking and distinguish their incentives. The studies also present the laws and regulations that affect the incentives and behavior of each actor, as well as the transactions these actors engage in from a general equilibrium perspective. Equally important, and a central focus of each study, is the interaction among the different actors during the budget process. Through this unique framework, the authors identify the role that the budget process may have in the broader policymaking game as a crucial arena to carry out key political transactions. This book is a breakthrough in the application of institutional economics to budgeting and public expenditure decisions. It is truly comparative in scope and probes beneath the formal rules of budgeting to determine how the process actually works. The studies published in this volume focus on Latin America, a continent in which informality dominates public governance, but the conclusions are applicable to developing and developed countries around the world. Allen Schick Professor of Political Science University of Maryland The new political economy is long on theory and short on compelling empirical analyses. This volume is a significant contribution to what is missing: thoughtful country studies that are well motivated by a conceptual framework. Latin America is the testing ground, but the lessons are general. Both theorists, for inspiration, and practitioners, for examples of what works and what does not, will benefit from a careful reading of this volume. Robert P. Inman Richard K. Mellon Professor Wharton School, University of Pennsylvania Long a leader in the systematic comparative analysis of Latin American economies, the IDB now turns its attention to the budget process and fiscal policy. The carefully constructed country studies employ an integrated approach that spans formal rules and actual practices to examine and explain an array of topics including executive-legislative relations, policy sustainability, quality of public provision, fit between policy and popular preferences, and the vagaries of reform. This volume is a landmark achievement and is essential reading for anyone that wants to understand how the region's economies, institutions, and politics interact to produce budget outcomes. James E. Alt Frank G. Thomson Professor of Government Harvard University