Judges as Fiscal Activists: Can Constitutional Review Shape Public Finance?

Abstract The judicialization of politics, or alternatively, politization of the judiciary has been much discussed over the last twenty years. Despite this, the way judges influence fiscal policy outcomes remains, to a large extent, unexplored. This paper attempts, at least partially, to fill this research gap. A judicial (constitutional) review constitutes the central element of the current analysis since it is considered as a key institutional device through which Constitutional (Supreme) Courts intervene in politics, including public finance. Specifically, this paper seeks to investigate empirically whether there is any systematic pattern according to which judges executing judicial review shape fiscal outcomes. The conceptual framework is based on the strategic interaction model and the assumption that the Constitutional Courts reflect public opinion (i.e. the Court as a majoritarian institution). Some preliminary results for a panel of 24 EU countries in the period 1995–2005 suggest that a strong judicial review correlates with a smaller size of government, measured as government income to GDP.