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Signaling in Political Budget Cycles: How Far Are You Willing to Go?

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  • JORGE MIGUEL STREB

Abstract

A key assumption in the literature on political cycles with rational voters and opportunistic politicians is that opportunism is common knowledge. In this framework, political cycles have been interpreted as a signal of competency. However, if opportunism is not common knowledge, cycles may no longer indicate competency, but rather opportunism. This is because highly opportunistic incumbents are willing to go farther to be reelected. Since political cycles require discretionality to reallocate budget items, a decrease of discretionality curbs cycles. It may also make elections more effective at selecting competent incumbents. Copyright 2005 Blackwell Publishing Inc..

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Bibliographic Info

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 7 (2005)
Issue (Month): 2 (05)
Pages: 229-252

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Handle: RePEc:bla:jpbect:v:7:y:2005:i:2:p:229-252

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  1. Torsten Persson & Guido Tabellini, 1997. "Political Economics and Macroeconomic Policy," NBER Working Papers 6329, National Bureau of Economic Research, Inc.
  2. Alesina, Alberto & Tabellini, Guido, 1988. "Credibility and politics," European Economic Review, Elsevier, vol. 32(2-3), pages 542-550, March.
  3. Kenneth Rogoff, 1987. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
  4. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August.
  5. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  6. Susanne Lohmann, 1998. "Rationalizing the Political Business Cycle: A Workhorse Model," Economics and Politics, Wiley Blackwell, vol. 10(1), pages 1-17, 03.
  7. Stein, Ernesto H. & Streb, Jorge M., 2004. "Elections and the timing of devaluations," Journal of International Economics, Elsevier, vol. 63(1), pages 119-145, May.
  8. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
  9. Jorge M. Streb, 1999. "Reelection or term limits? The short and the long view of economic policy," CEMA Working Papers: Serie Documentos de Trabajo. 144, Universidad del CEMA.
  10. Kenneth Rogoff & Anne Sibert, 1986. "Elections and Macroeconomic Policy Cycles," NBER Working Papers 1838, National Bureau of Economic Research, Inc.
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Cited by:
  1. Sebastián Nieto Parra & Javier Santiso, 2008. "Wall Street and Elections in Latin American Emerging Economies," OECD Development Centre Working Papers 272, OECD Publishing.
  2. Jorge M. Streb & Gustavo F. Torrens, 2009. "Making rules credible: Divided government and political budget cycles," CEMA Working Papers: Serie Documentos de Trabajo. 395, Universidad del CEMA.
  3. Ernesto H. Stein & Jorge M. Streb, 1999. "Elections and the Timing of Devaluations," CEMA Working Papers: Serie Documentos de Trabajo. 140, Universidad del CEMA.
  4. Stone, Daniel F., 2013. "Media and gridlock," Journal of Public Economics, Elsevier, vol. 101(C), pages 94-104.
  5. Alejandro Saporiti & Jorge Streb, 2008. "Separation of powers and political budget cycles," Public Choice, Springer, vol. 137(1), pages 329-345, October.
  6. Daniel Lema & Jorge M. Streb, 2013. "Ciclos electorales en política fiscal," CEMA Working Papers: Serie Documentos de Trabajo. 514, Universidad del CEMA.
  7. Joel Sebastián Schneider, 2004. "El rol de los gobernadores opositores en las elecciones presidenciales," CEMA Working Papers: Serie Documentos de Trabajo. 281, Universidad del CEMA.

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