Stringent fiscal rules and budgetary procedures might generate incentives for political decision-makers to cut predominantly
productive public investment during periods of fiscal consolidation. While the influence of the European Stability and Growth
Pact on public investment received a lot of attention in the empirical literature, only a few studies consider the impact
of different budgetary decision-making rules and procedures at the national level on government investment spending. We test
empirically for the effect of political factors and the institutional framework of budgeting on public investment in EU 15
over the period 1990-2005. Our results show that stringent quantitative constraints limit government investment, but a centralisation
of budgeting procedures by providing more agenda setting powers to the finance minister (delegation approach) or by the use
of medium-term fiscal contracts are not related to public investment spending cuts.
Keywords:fiscal consolidation fiscal policy
Forschungsbereich:Makroökonomie und öffentliche Finanzen