Journal Articles

Informal Norms as a Bridge between Formal Rules and Outcomes of Government Financial Operations: Evidence from State Balanced Budget Requirements

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Both formal rules and informal norms guide government operations; formal rules often function through informal norms. Balanced budget requirements (BBRs) are formal rules, but they are implemented via the intermediary of informal norms—interpretation of BBRs by state officials. This article examines the fiscal implications of informal norms that govern budgetary balance. We propose that informal norms have substantive implications in policy making and implementation. To test the proposition, we obtain state self-reported, time-varying data on balanced budget provisions as observations of informal norms, compare them against formal, codified balanced budget requirements from recent research to identify gaps between rules and norms, and decompose the gaps using two categories—“interpretations” and “reverse interpretations” of formal balanced budget requirements. We then conduct probit estimation to obtain the effects of informal norms as well as the interpretations and reverse interpretations on two measures of budgetary balance. Results show that informal norms do affect outcomes of government financial operations; the two-step decomposition of the gaps between formal rules and informal norms provides further information on the locus of these effects. The article identifies the interpretation of formal rules as a new research area, thus contributing to the budgetary institutions and policy implementation literatures.

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Detail Information

Series Title

Journal of Public Administration Research and Theory

Call Number

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Publisher

United Kingdom : Oxford University Press., 2010

Collation

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Language

English

ISBN/ISSN

10531858

Classification

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Content Type

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Media Type

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Carrier Type

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Edition

Vol. 20 No. 3, July 2010.pp. 655-678

Subject(s)

Policy implementation
Government budgetary balance
Government Financial Operations
The budgetary institutions

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