| This dissertation examines evidence from developing nations in Asia and the Pacific (with special emphasis on Thailand) in order to arrive at an understanding of the relationship between certain qualities of a budget process and fiscal discipline. The qualities of the budget process under examination are centralization rigidity, and transparency (CRT). The investigation tests whether these qualities effectively promote fiscal discipline by reducing fiscal inefficiencies such as fiscal illusion and deficit bias. Individual analyses of time-series and cross-country data take into consideration various indicators of fiscal discipline, such as overall budget surplus, primary surplus, gross public debt, percentage increase in gross debt, and net government borrowing.The cross-country analysis examines data obtained from the following eleven developing Asian countries: Bangladesh, India, Indonesia, the Republic of Korea, Malaysia, Nepal, Pakistan, the Philippines, Singapore, Sri Lanka, and Thailand. The results of this analysis indicate that CRT qualities have a positive and statistically significant correlation with fiscal discipline.Time-series data from Thailand ranging from 1960 to 1994 reveal that centralization alone (through the political strength of the executive) is more robustly correlated with fiscal discipline than the combination of CRT qualities. This implies that centralization (in terms of political strength) has a strong influence on fiscal discipline in Thailand.In addition to the aforementioned evidence from the real world, this dissertation presents conclusions derived from a series of laboratory experiments. These experiments investigated the decision-making processes of individual appropriators who used a voting mechanism to produce a two-dimensional budget. In this perfectly decentralized environment, individuals' concerns about the common-pool-resource problem (reflected by non-circular indifference curves around an ideal point) did not result in a smaller-sized budget under either a top-down or bottom-up voting mechanism. |
