Additional Web-Appendix
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Additional Web-Appendix Complementary material for Do the personal characteristics of finance ministers affect changes in public debt? Table AA1 provides information on the included time series per country. In Figure AA1, the effects of a finance minister’s previous years as cabinet member and economics education on the change in the central government debt-to-GDP ratio conditional on the state of the economy are presented. As mentioned in the main text, there is no statistically significant conditional effect of these measures. Table AA2 (econometric model specification) and Table AA3 (selection of finance ministers) show the results of the robustness tests as described in the main text of the paper. Table AA4 to Table AA6 and Figure AA2 provide the results of the estimation of the paper’s baseline specifications using the alternative selection procedure. Only finance ministers who were in office on January 1 are selected for this estimation. Finally, in Table AA7, I show a comparison of years per country, in which there is difference between the two selection procedures of finance ministers. 1 Table AA1: Included time series in the regression analysis Country Included Period Missing Number of Number of Start End Observations Observations Finance Ministers Austria 1982 2010 - 29 9 Denmark 1982 2010 - 29 9 Finland 1992 2010 - 19 5 France 1994 2009 1997 to 2001 11 6 Germany 1982 2010 - 29 6 Greece 1998 2010 - 13 5 Ireland 1983 2009 - 27 9 Italy 1982 2007 1995 25 11 Luxembourg 1994 2010 - 16 2 Netherlands 1982 2010 - 29 6 Norway 1982 2010 - 29 9 Portugal 1983 2010 - 28 9 Spain 1982 2010 - 29 7 Sweden 1982 2010 - 29 9 United Kingdom 1982 2010 - 29 8 Sample 1982 2010 372 110 Notes: The data are collected for the period 1980-2010. Since I use the change in the debt-to-GDP ratio and include the lagged dependent variable, the first observation is in 1982. Figure AA1: Finance minister characteristics conditional on the state of the economy The impact of previous years as cabinet member on ΔCGD conditional on the state of the economy .5 .5 .15 .25 .2 0 0 .1 .15 -.5 .1 Marginal effect Marginal effect -.5 .05 Density histogramDensity Density histogramDensity -1 .05 0 0 -1 -1.5 -9 -6 -3 0 3 6 9 12 1 3 5 7 9 11 13 15 17 19 21 23 25 Growth rate Unemployment rate The impact of economics education on ΔCGD conditional on the state of the economy 4 2 .25 .15 .2 2 0 .1 .15 0 .1 -2 Marginal effect Marginal effect .05 Density histogramDensity histogramDensity -2 .05 -4 0 0 -4 -9 -6 -3 0 3 6 9 12 1 3 5 7 9 11 13 15 17 19 21 23 25 Growth rate Unemployment rate 2 Table AA2: Robustness test: Econometric model specification (1) (2) (3) (4) (5) (6) (7) CONTROL VARIABLES Lagged change in CGD 0.321*** 0.465*** 0.270*** 0.275*** 0.275*** 0.312*** 0.252*** [6.356] [7.226] [4.494] [4.812] [4.239] [6.191] [3.622] Lagged debt level -0.212*** -0.0745*** -0.222*** -0.223*** -0.223*** -0.217*** -0.221*** [-8.397] [-3.400] [-8.183] [-8.355] [-7.780] [-8.066] [-7.279] Unemployment rate 0.590*** 0.126 0.413*** 0.468*** 0.468*** 0.441*** 0.527*** [4.292] [1.262] [3.441] [3.453] [3.078] [3.656] [2.758] Real growth of GDP -0.578*** -0.512*** -0.288*** -0.230** -0.230* -0.235** -0.204 [-5.563] [-4.386] [-2.740] [-2.056] [-1.857] [-2.276] [-1.437] Long term interest rate 0.498*** 0.550*** 0.631*** 0.611*** 0.611*** 0.600*** 0.587*** [3.704] [3.501] [3.769] [3.529] [3.373] [3.965] [3.107] Inflation -0.535*** -0.589*** -0.712*** -0.665*** -0.665*** -0.651*** -0.635*** [-4.909] [-3.896] [-6.145] [-5.218] [-5.135] [-4.535] [-4.294] Population 32.52** 3.673 55.14*** 55.12*** 55.12*** 52.51*** 51.04*** [2.470] [0.464] [4.066] [4.142] [4.133] [3.490] [3.497] Economic globalization index 0.0990 0.0157 0.431*** 0.362*** 0.362*** 0.351*** 0.351*** [1.616] [0.243] [4.095] [3.333] [3.159] [3.004] [2.707] Election year 0.459 0.853** 0.764*** 0.598** 0.598* 0.617** 0.624* [1.449] [2.558] [2.901] [2.000] [1.958] [2.095] [1.795] Government fragmentation -0.0372 -0.0207 -0.0283 -0.0307 -0.0307 -0.0302 -0.0849 [-0.497] [-0.268] [-0.329] [-0.357] [-0.340] [-0.211] [-0.954] Years in office party-coalition -0.0491 -0.0607 -0.107* -0.0997* -0.0997* -0.100 -0.0738 [-0.882] [-1.055] [-1.724] [-1.783] [-1.697] [-1.578] [-1.379] Ideological complexion 0.0742 0.194 -0.0937 -0.0784 -0.0784 -0.0660 -0.0747 of the gov’t [0.389] [1.215] [-0.480] [-0.378] [-0.409] [-0.311] [-0.358] FINANCE MINISTER Years in office -0.279*** -0.138** -0.277*** -0.276*** -0.276*** -0.269*** -0.264*** [-3.949] [-2.139] [-3.713] [-4.613] [-4.082] [-3.828] [-4.819] Previous years cabinet member -0.107 -0.0412 -0.113* -0.113* -0.113 -0.109 -0.0894 [-1.624] [-0.517] [-1.864] [-1.921] [-1.592] [-1.373] [-1.412] PRIME MINISTER Years in office 0.0176 0.0377 0.0658 0.0542 0.0542 0.0582 0.0457 [0.304] [0.614] [1.165] [1.188] [1.000] [0.887] [0.965] Previous years cabinet member 0.0521 0.0306 0.0968** 0.0932** 0.0932** 0.0916* 0.0724 [1.103] [0.694] [2.285] [2.267] [2.080] [1.883] [1.272] Economics education -0.152 -0.756 -0.176 -0.216 -0.216 -0.209 -0.378 [-0.319] [-1.395] [-0.368] [-0.465] [-0.469] [-0.385] [-0.649] Legal education -1.095** -0.495 -1.197** -1.131** -1.131* -1.100** -1.287** [-2.369] [-0.996] [-2.486] [-2.375] [-1.980] [-2.040] [-2.150] Unknown education -0.943 0.195 -0.210 -0.335 -0.335 -0.317 -0.832 [-1.013] [0.191] [-0.228] [-0.366] [-0.484] [-0.310] [-1.061] 2nd lag ΔCGD - - - - - - 0.0326 - - - - - - [1.294] Constant -363.0** -36.70 -465.7*** -618.6*** -618.6*** - -495.3*** [-2.567] [-0.431] [-4.212] [-4.274] [-4.255] - [-3.742] Country specific trend Time fixed effects Luxembourg included Finance minister clustering Prime minister clustering Party-coalition clustering Observations 372 372 355 372 372 372 343 R2 0.717 0.709 0.802 0.787 0.787 - - Adjusted R2 0.675 0.651 0.750 0.733 0.733 - - Cluster 110 110 108 74 73 - - Notes: The dependent variable is the change in a country’s central government debt-to-GDP ratio, measured in percentage points. The estimation method is OLS with country- and time-fixed effects. The t-statistics are presented in brackets. Asterisks indicate significance at the 10(*), 5(**) and 1(***) percent level. Base category for the educational variables is “other education”. Results in column 5 refer to the bias-corrected fixed effects estimator. Column 6 presents results for the Arellano Bond GMM estimation. 3 Table AA3: Robustness check: Selection of finance ministers (1) (2) (3) (4) (5) CONTROL VARIABLES Lagged change in CGD 0.274*** 0.244*** 0.235*** 0.275*** 0.276*** [3.875] [3.464] [3.283] [4.905] [4.975] Lagged debt level -0.227*** -0.233*** -0.233*** -0.222*** -0.223*** [-7.921] [-7.907] [-7.709] [-8.246] [-8.317] Unemployment rate 0.498*** 0.554*** 0.582*** 0.463*** 0.467*** [3.756] [3.601] [3.597] [3.534] [3.604] Real growth of GDP -0.233** -0.219* -0.215* -0.225* -0.234** [-2.106] [-1.695] [-1.673] [-1.972] [-2.013] Long term interest rate 0.590*** 0.534*** 0.530*** 0.610*** 0.611*** [3.682] [3.261] [3.105] [3.804] [3.830] Inflation -0.642*** -0.688*** -0.681*** -0.665*** -0.668*** [-4.767] [-4.679] [-4.583] [-5.148] [-5.151] Population 46.37*** 55.14*** 53.47*** 54.37*** 54.76*** [3.243] [3.592] [3.395] [3.946] [3.986] Economic globalization index 0.361*** 0.367*** 0.364*** 0.362*** 0.365*** [2.922] [2.718] [2.663] [2.951] [2.990] Election year 0.528* 0.172 0.259 0.575* 0.618** [1.802] [0.474] [0.674] [1.873] [2.078] Government fragmentation 0.000417 -0.0209 0.0119 -0.0315 -0.0304 [0.00425] [-0.207] [0.108] [-0.362] [-0.346] Years in office party-coalition -0.101* -0.0622 -0.0531 -0.0993* -0.0983* [-1.693] [-0.984] [-0.821] [-1.791] [-1.776] Ideological complexion of gov’t 0.0228 -0.112 -0.121 -0.0828 -0.0780 [0.104] [-0.475] [-0.507] [-0.417] [-0.392] FINANCE MINISTER Years in office -0.186*** -0.236*** -0.226*** -0.241*** -0.273*** [-2.636] [-3.150] [-2.962] [-3.055] [-4.265] Previous years cabinet member -0.0518 -0.0983 -0.0926 -0.116* -0.112* [-0.728] [-1.282] [-1.216] [-1.883] [-1.842] PRIME MINISTER Years in office 0.0291 0.0640 0.0414 0.0551 0.0564 [0.566] [1.010] [0.601] [1.035] [1.069] Previous years cabinet member 0.114** 0.115** 0.122** 0.0919** 0.0935** [2.524] [2.240] [2.282] [2.118] [2.165] Economics education 0.185 -0.184 -0.198 -0.241 -0.215 [0.322] [-0.313] [-0.323] [-0.510] [-0.456] Legal education -1.155** -1.670*** -1.752*** -1.132** -1.140** [-2.055] [-2.734] [-2.743] [-2.297] [-2.302] Unknown education -0.658 -0.347 -0.760 -0.426 -0.296 [-0.659] [-0.357] [-0.667] [-0.471] [-0.331] FINANCE MINISTER CHANGES Dummy finance minister change1: FMt != FMt-1 0.309 [0.752] Dummy finance minister change2: FMt != FMt+1 -0.0948 [-0.319] Constant -523.3*** -355.2*** -598.4*** -610.3*** -614.6*** [-3.347] [-3.832] [-3.481] [-4.060] [-4.100] Selection based on January 1 Different FM excluded Different FM & PM excluded Observations 372 326 317 372 372 R2 0.783 0.796 0.793 0.788 0.787 Adjusted R2 0.728 0.735 0.729 0.733 0.732 Cluster 113 102 101 110 110 Notes: The dependent variable is the change in a country’s central government debt-to-GDP ratio, measured in percentage points.