| Abstract [eng] |
The aim of this work was to find out which systemic factors have caused suboptimal fiscal policy of Lithuania, (no budget surplus during economic growth, in the years 2000-2008) in comparison with Estonia. There were 4 hypotheses and the research showed that no one reason can be named as the only one that caused this result. A better fiscal policy conducted in Estonia was caused due to a complex of factors. First hypothesis was based on historical institutionalism. It provided 3 independent variables (hereinafter – IV). 1st – path dependence – showed that Estonia created favourable conditions for fiscal discipline already at the beginning of its independence: unlike in Lithuania, there was a radical desovietisation and liberalisation. Also, as there were no citizenship rights granted to the Russian minority, a potentially wide leftist electorate (most Russians worked in USSR factories that were reformed) was eliminated. The 2nd IV was effectiveness of rules of institutional budget planning, management and spending prioritisation. DG ECFIN evaluated these rules and criticized Lithuania for not having a good set/system of fiscal rules that would ensure anticyclical fiscal policy (budget surplus in good times). The 3rd IV was the existence or non-existence of a constitutional norm of sound public finance. The research showed there was none in both countries. Although in 2008 Lithuania passed a fiscal discipline law, it is not implemented. Estonia, however, follows strict fiscal discipline although it does not have any law of this kind. The reason for Estonia’s success lies in the fact that coalition’s agreements and budget strategies are firmly attended and during all the period of economic growth a liberal Reform party (Reformierakond) had a huge influence in the Government. The second hypothesis was based on the economic point of view. There were such IVs: reforms of education, health insurance and pensions and the state’s obligations. The research showed that Estonia was 2-5 years ahead of Lithuania in all of these fields. Regardless of the fact that the amount of Estonia’s obligations was very similar to Lithuania’s, the former had a bigger GDP to reallocate. The reason for this was that in Estonia there were not as many tax exemptions for various interest groups as there were in Lithuania. The third hypothesis was based on Political Economy. The 1st IV was political business cycle. The research showed that the cycle had a worse impact on fiscal discipline in Lithuania than in Estonia. The 2nd IV was the parliamentary election system. The research showed that one-mandate component of the election system in Lithuania most probably had a negative impact on Lithuania’s fiscal discipline. In Estonia, parliamentarians are elected only by lists. The 3rd IV was level of corruption and trust in institutions. There is big discrepancy between Lithuania and Estonia. This could be explained by the so called “Make the Leviathan starve” argument – if society distrusts public authorities, state cannot create budget surplus, because people in case of positive economic shock demand tax exemptions and more public spending, being afraid that collected surplus would turn in various forms of rents for interest groups. Lithuania had lower level of trust and higher level of corruption. The fourth hypothesis was based on sociological institutionalism. IV was the dominating cultural tradition. The mechanism of logical chain is this – cultural tradition affects informal institutions (pattern of behaviour), in general Estonia had a different economic mentality, as well as more favorable characteristics of society, prudence and frugality. The interviewed Lithuanian as well as Estonian experts stated that this aspect could be also important factor that had indirect impact for different fiscal policy during economic growth, According to interviewed experts, Estonian public opinion supports the strict Scandinavian type model of fiscal responsibility. |
