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Political pressure and procyclical expenditure: An analysis of the expenditures of state governments in Mexico

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  • Abbott, Andrew
  • Cabral, René
  • Jones, Philip
  • Palacios, Roberto

Abstract

Government expenditures are procyclical if they increase in periods of economic growth and decrease in periods of economic downturn. This paper tests the proposition that (within federations) political pressures for public expenditure increase the likelihood that expenditures and intergovernmental transfers will be procyclical. An analysis of political pressures in Mexico suggests that political pressures will produce a distinct pattern of procyclical expenditures across fiscal tiers and across government budgets. This prediction is tested with reference to the expenditures of 31 states in Mexico between 2005 and 2010.

Suggested Citation

  • Abbott, Andrew & Cabral, René & Jones, Philip & Palacios, Roberto, 2015. "Political pressure and procyclical expenditure: An analysis of the expenditures of state governments in Mexico," European Journal of Political Economy, Elsevier, vol. 37(C), pages 195-206.
    • Handle: RePEc:eee:poleco:v:37:y:2015:i:c:p:195-206
    DOI: 10.1016/j.ejpoleco.2014.12.001
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    Cited by:

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    2. Joël Cariolle & Petros G Sekeris, 2021. "How export shocks corrupt: theory and evidence," Working Papers hal-03164648, HAL.
    3. João T. Jalles, 2022. "Do credit rating agencies reward fiscal prudence?," International Finance, Wiley Blackwell, vol. 25(1), pages 2-22, April.
    4. Heimberger, Philipp, 2023. "The cyclical behaviour of fiscal policy: A meta-analysis," Economic Modelling, Elsevier, vol. 123(C).
    5. Lim, Jamus Jerome, 2020. "The political economy of fiscal procyclicality," European Journal of Political Economy, Elsevier, vol. 65(C).
    6. Raul Alberto Ponce Rodriguez & Benito Alan Ponce Rodriguez, 2022. "An Analysis of Optimal Tax Revenue Sharing for Mexico," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 17(2), pages 1-20, Abril - J.
    7. João Tovar Jalles, 2019. "Wagner and the fading voracity effect: short vs. long-run effects in developing countries," Review of Development Finance Journal, Chartered Institute of Development Finance, vol. 9(1), pages 51-78.
    8. Jalles, João Tovar, 2020. "Social expenditure cyclicality: New time-varying evidence in developing economies," Economic Systems, Elsevier, vol. 44(3).
    9. Jalles, João Tovar, 2021. "Dynamics of government spending cyclicality," Economic Modelling, Elsevier, vol. 97(C), pages 411-427.
    10. João Tovar Jalles, 2019. "On the Cyclicality of Social Expenditure: New Time-Varying evidence from Developing Economies," Working Papers REM 2019/82, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    11. João T. Jalles, 2020. "Explaining Africa's public consumption procyclicality: Revisiting old evidence," International Finance, Wiley Blackwell, vol. 23(2), pages 297-323, August.
    12. Andrew Abbott & René Cabral & Philip Jones, 2017. "Incumbency and Distributive Politics: Intergovernmental Transfers in Mexico," Southern Economic Journal, John Wiley & Sons, vol. 84(2), pages 484-503, October.
    13. Deepak Kumar Behera & Ranjan Kumar Mohanty & Umakant Dash, 2020. "Cyclicality of public health expenditure in India: role of fiscal transfer and domestic revenue mobilization," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 67(1), pages 87-110, March.

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    More about this item

    Keywords

    Business cycles; Fiscal policy; Voracity effects; Mexico; Latin-America;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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