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Electoral manipulation via voter-friendly spending: Theory and evidence

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  • Drazen, Allan
  • Eslava, Marcela

Abstract

We present a model of the political budget cycle in which incumbents try to influence voters by changing the composition of government spending, rather than overall spending or revenues. Rational voters may support an incumbent who targets them with spending before the election even though such spending may be due to opportunistic manipulation, because it may also reflect sincere preference of the incumbent for types of spending voters favor. Classifying expenditures into those which are likely targeted to voters and those that are not, we provide evidence supporting our model in data on local public finances for all Colombian municipalities. Our findings indicate both a pre-electoral increase in targeted expenditures, combined with a contraction of other types of expenditure, and a voter response to targeting.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 92 (2010)
Issue (Month): 1 (May)
Pages: 39-52

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Handle: RePEc:eee:deveco:v:92:y:2010:i:1:p:39-52

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Web page: http://www.elsevier.com/locate/devec

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Keywords: Political budget cycle Expenditure composition Elections Colombia;

References

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  1. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  2. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," NBER Working Papers 1838, National Bureau of Economic Research, Inc.
  3. Brender, Adi & Drazen, Allan, 2005. "Political budget cycles in new versus established democracies," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1271-1295, October.
  4. Allan Drazen & Marcela Eslava, 2006. "Pork Barrel Cycles," NBER Working Papers 12190, National Bureau of Economic Research, Inc.
  5. Adi Brender & Allan Drazen, 2008. "How Do Budget Deficits and Economic Growth Affect Reelection Prospects? Evidence from a Large Panel of Countries," American Economic Review, American Economic Association, vol. 98(5), pages 2203-20, December.
  6. Eslava, Marcela, 2006. "Ciclos políticos de la política fiscal con votantes opuestos al déficit. El caso colombiano," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(290), pages 289-336, abril-jun.
  7. Kneebone, R.D. & McKenzie, K.J., 1998. "Electoral and Partisan Cycles in Fiscal Policy: an Examination of Canadian Provinces," Papers 98-06, Calgary - Department of Economics.
  8. Peltzman, Sam, 1992. "Voters as Fiscal Conservatives," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 327-61, May.
  9. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
  10. Kenneth Rogoff, 1990. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
  11. Jeffrey M. Wooldridge, 2001. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262232197.
  12. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
  13. Bowsher, Clive G., 2002. "On testing overidentifying restrictions in dynamic panel data models," Economics Letters, Elsevier, vol. 77(2), pages 211-220, October.
  14. Khemani, Stuti, 2004. "Political cycles in a developing economy: effect of elections in the Indian States," Journal of Development Economics, Elsevier, vol. 73(1), pages 125-154, February.
  15. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
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