Background
The budget process is a policy arena where political actors address distributive conflicts through formal rules and repeated interactions. The politics of budget process thus, have a direct impact on the state's capacity to make effective spending allocations that benefit the most vulnerable, that represent the will of the people and are sustainable over time. Much of the existing theoretical work has focused on institutional determinants of budget outcomes, or on the technical aspects of the aid agenda, but much conceptual work remains to be done to define budget outcomes and to develop a general equilibrium approach to understanding the political determinants of such outcomes and the contribution that budget support can or does make.
In an ideal setting, a sound or cooperative budget outcome is associated with the same conditions that enable good governance and underpin effective state action. This means that the budget is not vulnerable to short term political impulses but rather enjoys stability over time; adapts effectively to changing or unexpected economic conditions; produces sustainable budgets and highest long-run returns; and reflects the preferences of the median voter. The dimensions proposed thus far are not independent of one another and further work is needed to explore and empirically test causal relationships and trade offs between different dimensions and their overall impact on the quality of budget outcomes.
Objectives
The main research question centers on the way in which political and institutional variables, such as the structure of political institutions, the political rules of the game and the style and duration of political leadership, shape budgetary outcomes and long term budget governance. At this preliminary stage, the research will focus on deepening conceptual understanding of some of these interactions in four critical areas:
1) Representativity of budget outcomes
This dimension measures whether expenditure allocation reflects the preferences of the median voter or tends to privilege private interests of well organized groups or elites. Some measures associated with greater representativeness are the presence of a proportional representation system, a competing party system, and lower levels of malapportionment. Other relevant variables are the extent to which there are fewer off budgetary allocations and whether there are provisions for disclosure of government allocations. Ideally, these indicators should be controlled by per capita spending by province and for disparities in poverty and population.
2) Effectiveness of expenditure
This dimension explores the quality and timeliness of budget allocations. A preliminary –though imperfect- proxy for testing this effect is by looking at the magnitude and direction of resource reallocation during the budget process. The underlying assumption is that budget processes characterized by large and constant spending reallocations are more likely to produce ineffective outcomes, whereas sectors that enjoy a steady flow of resources develop more stable operations and better planning over time. We also explore the evolution of public spending efficiency in specific sectors (education, health), in order to determine how efficient is the allocation of resources in the sector vis-à-vis policy outcomes.
3) Budget support as instrument of greater budget transparency
Inasmuch as the institutional and political conditions are present, the underlying premise is that GBS instruments can contribute to improving the quality of budget outcomes. One way to assess this impact is by looking at the potential of the GBS instrument (which combines financing with policy dialogue and technical assistance) to reduce earmarking, promote disclosure of public accounts and promote laws of fiscal responsibility so as to bring about more sustainable, pro-poor (representative) and accountable budget outcomes.
4) Budget support as an instrument of budget flexibility
The underlying premise rests on the capability of GBS to increase and channel the flow of resources when the domestic budget process has exhausted local revenues or has met unexpected conditions (i.e. natural disasters). The potential for bringing greater budget flexibility is closely associated with the need to limit the range for discretionary budget allocations available to budget players or closely monitoring the flow of resources to the most vulnerable sectors. Budget flexibility rests on the ability to react to changing conditions in a transparent and predictable manner. One way to examine this is to look at the extent to which budget support is supporting greater budget predictability (both in terms of external flows and internal allocations) and, in turn, laying down the conditions for a more flexibile and less interest-driven budget over time.
Methodology
The proposed research program seeks to bridge two different but inter-related fields, one that features a rich theoretical discussion on the institutional determinants of budget outcomes, and the other which is dominated by a technocratic approach that is largely empirical but lacking conceptual development.
The goal is to arrive at new conceptualizations and formulations that will both advance the research agenda and provide a new focus for practitioners and policy makers. To accomplish these, the research seeks to:
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identify and sharpen existing theoretical approaches to the political economy of the budget process , in order to empirically test a set of interrelated hypotheses on the institutional causes of budget outcomes
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to provide ‘thicker', ‘deeper' analysis of the political economy of budget support that can inform aid practitioners seeking to improve the effectiveness and sustainability of budget support programmes
The research will involve two phases, with most emphasis initially on the first phase.
Phase one involves the core of the conceptual work. It will involve a critical review of existing literature (both theoretical and evaluative) to identify existing conceptualizations of budget governance and its institutional (political, economic) determinants. The aim is to:
- develop a deeper and richer understanding of the determinants of better budget outcomes,
- how the thinking and practice of budget support contributes or not and,
- how each is linked with broader understandings of state capacity
This phase will result in a conceptual paper as a basis for a DRC/IDS working paper and a journal article highlighting the determinants of budget governance, the role of GBS, policy dilemmas and opportunities. As part of the conceptual phase the researchers will seek to identify possible future collaborators amongst DRC partner countries and sound out interest in developing a more comprehensive project for examining the conditions for sound budget governance as a basis for supporting state capacity. The researchers will look to engage practitioners in DFID and other development agencies with a view to building a constituency of interest in the general work around the political economy of budgets and budget support.
The second phase involves empirically testing the proposed theoretical approach through the use of secondary data sources or existing case studies. This empirical section will largely draw on (lower-middle income) Latin American countries including some who are recipients of budget support ( Bolivia , Ecuador , Jamaica , Guatemala ). These countries also offer sufficient theoretical knowledge and available data on the interaction between major political and institutional variables and the budget process. If there are adequate resources some data may also be collected through preliminary work in the field.
Researchers
Main Researchers:
Andrés Mejía Acosta - IDS Sussex, UK
Alison Evans - Overseas Development Institute (ODI), UK
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