Government budgets can be complex and contentious. Chapter 1 explains the importance of understanding government budgetary behavior and argues for taking a more realistic view of the process. If governments change part of the budget, then they may need to jostle other budgetary pieces as well. We introduce the broad brushstrokes of our theoretical argument that explains when governments have the desire and power to alter budgets, given both their ideological preferences and contextual factors. We acknowledge that spending increases or decreases in some policy areas may require shifts in budgets for other areas, so we use a compositional methodological approach to investigate those changes. In addition, we foreshadow how our theoretical argument also helps to explain the linkages between expenditures, revenues, deficits, and budgetary volatility. To test theories about these linkages we use panel vector autoregressive (pVAR) models. In order to make our findings from the complex models that we use to test our theoretical propositions accessible, we will use a series of graphical interpretation strategies and present technical details of our models and graphs in appendices. Overall, Chapter 1 sets the stage for a book that unravels the brainteaser of government budgetary behavior across countries and years.

We turn to the larger pieces of the budget in Chapter 5, where we focus on two objectives. First, we ask how the components of the budgets fit together by conducting causality tests for the full range of possible relationships between expenditures, revenues, deficits, and budgetary volatility using a panel vector autoregressive (pVAR) model. We find that changes to expenditures and revenues drive changes to deficits, and we also find that changes to deficits lead to revenue changes. Second, using findings from these causality tests from the pVAR model, we then test our expectations about ideology and context on total spending, revenues, budget deficits, and budgetary volatility. Once we include these causal relationships in our models, we find that government ideology and majority status do not appear to alter either total expenditures or revenues, but a shift from a left to a right majority government is associated with a long-run decrease in deficits. For budgetary volatility, a move from a left to a right majority government corresponds with a positive significant increase in volatility. These findings fit our expectations that it is political competition that shifts budgets, with government ideology many times proctoring for those differences.