Austrian Public Debt Growth: A Public Choice Perspective

Abstract

This paper analyzes whether Austrian fiscal policies have been sustainable during the last five decades, concentrating on the federal (central state) level. Tests indicate that Austrian fiscal policies were sustainable, though with a decreasing weight attached to this goal. Starting in 1975, the unemployment rate played a significant role in the sense of a counter-cyclical orientation of Austrian fiscal policy as part of the concept of “Austrokeynesianism.” The development of public debt in Austria seems to be driven primarily not by ideology, but by structural causes and a shift of the budgetary policy paradigm. We find empirical evidence that governments in Austria dominated solely by one party run higher deficits than coalitions of the two large parties or the two conservative parties. There are no indications of a political business cycle.