Do the personal characteristics of finance ministers affect changes in public debt?

Using a unique dataset of the personal characteristics of national finance ministers in Western Europe (1980-2010), I show that a finance minister's experience affects the national debt-to-GDP ratio. The increase in the debt-to-GDP ratio is smaller if the finance minister stays in office for an...

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Bibliographic Details
Published in:Public choice 2014-10, Vol.161 (1/2), p.183-207
Main Author: Moessinger, Marc-Daniel
Format: Article
Language:English
Subjects:
Appropriations
Budgets
Datasets
Decision making
Deficit financing
Econometrics
Economics
Economics and Finance
Economics education
Educational background
Elections
Estimation
Europe
Finance
Fiscal policy
GDP
Government cabinets
Government executives
Gross Domestic Product
Hypotheses
Interaction
Literature reviews
Ministers
Personal Finance
Personality traits
Political Science
Prime Ministers
Psychological aspects
Public choice
Public Debt
Public Finance
Stability
Studies
Western Europe
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Summary:Using a unique dataset of the personal characteristics of national finance ministers in Western Europe (1980-2010), I show that a finance minister's experience affects the national debt-to-GDP ratio. The increase in the debt-to-GDP ratio is smaller if the finance minister stays in office for an additional year. This result is robust to the inclusion of the personal characteristics of prime ministers and a measure of political stability. However, the magnitude of the effect is sensitive to how finance ministers are selected in the econometric model when more than one minister holds office during a particular year. The estimation of interaction terms further reveals that experience particularly matters in election years or in times of negative GDP growth because an experienced finance minister has the power to restrict the usual increase in the debt-to-GDP ratio. In contrast, a finance minister's educational background and ideological leaning have no significant impact on the debt-to-GDP ratio.
ISSN:0048-5829
1573-7101
DOI:10.1007/s11127-013-0147-x