Academic journal article Public Finance and Management

A Social Constructionist Perspective on the Diffusion of Innovative Fiscal Responsibility Legislation

Academic journal article Public Finance and Management

A Social Constructionist Perspective on the Diffusion of Innovative Fiscal Responsibility Legislation

Article excerpt

ABSTRACT

Compared to competitive, coercive and learning models, social constructionist theory is particularly well-suited to explaining the diffusion of policy norms across cross-country networks. This paper augments this approach with a myth perspective that is applied to an analysis of the diffusion of the qualitative fiscal norms embedded in New Zealand's innovative Fiscal Responsibility Act of 1994. The 'prime mover', 'innovative discontinuity' and 'unmodified legislative success' components of the agent significance myth surrounding this fiscal responsibility law (FRL) are examined and the scope and limits of its subsequent diffusion are relat-ed to mutual identification and interaction across pre-established network linkages between actors who have learnt its usefulness. The relative durability of myths compared to fads lend an unpredictability to the diffusion process, the potential limits of which are shaped by cultural and institutional factors that influence the receptiveness of governments to such norm-based approaches to fiscal discipline.

1. INTRODUCTION

There is a growing cross-disciplinary literature on the 'diffusion' of policy 'innovations' (reviewed by Weyland, 2005 and Dobbin et al., 2007) that shares overlapping research concerns with the literature on policy learning (Heclo 1974), policy transfer (Dolowitz and Marsh 2000) and lesson drawing (Rose 1991). At the very least, contributors to this literature are expected to (i) define the characteristics of the reform that render it 'innovative' and (ii) se-lect from these a 'core' subset that can be used to establish the substantive similarity of reforms implemented in other countries so that their emergence can be represented as being part of the diffusion process of the original inno-vation.

That this may be less straightforward than it appears can be illustrated by a critical evaluation of Lienert's (2010) study of the diffusion of Fiscal Respon-sibility Laws (FRLs). This writer uncontroversially traces this diffusion to the process that led to the implementation of the Fiscal Responsibility Act (FRA) of 1994 in New Zealand. He finds the innovative character of this reform in its being a limited scope law that 'elaborates on the rules and procedures relating to three budget principles: accountability, transparency and stability' (p. 5 original italics). In tracking the diffusion of this legislation to other countries, he identifies four core characteristics: (i) 'specification of the medium-term path of fiscal aggregates'; (ii) 'description of the medium-term and annual budget strategy for attaining the chosen fiscal objectives'; (iii) 'regular publi-cation of reports (at least twice a year) on the attainment of fiscal objectives or targets'; (iv) 'audited annual financial statements that assure the integrity of fiscal information' (p. 5).

These characteristics were most immediately reflected in Australia's 'Charter of Budget Honesty' (1996) and the UK's 'Code of Fiscal Stability' (1998) that eventually morphed into the Fiscal Responsibility Act of 2010. They also came to be incorporated in FRLs introduced in clusters of Latin American (Colombia 1997, Argentina 1999, Peru 1999, Brazil 2000, Ecuador, 2002, Mexico 2007 and Panama 2008) South Asian countries (India 2003, Sri Lanka 2003 and Pakistan 2005) and African (Tanzania 2001, Mauritius 2006 and Nigeria 2007) countries. Moreover FRL-type measures (incorporating some but not all of the four core characteristics) have spread even more widely to around 40 percent of emerging and 20 percent of advanced countries (Lienert, 2010, p. 4).

The diffusion of FRLs thus seems to exhibit a number of the empirical characteristics that Weyland (2005) observes in other policy diffusion pro-cesses. These are: (i) 'commonality in diversity' with similar reforms being adopted in countries at different stages of development with different political and economic structures; (ii) 'geographic clustering'; and (iii) an 'S-curve' pattern of adoption, particularly within particular geographic clusters. …

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