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Political business cycles at the municipal level

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Author Info
Linda Veiga ()
Francisco Veiga ()

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Abstract

The present article tests predictions of rational political business cycle models using a large and previously unexplored data set of Portuguese municipalities. This data allows for a clean test of these predictions due to the high level of detail on expenditure items, an exogenous fixed election schedule, and homogeneity of Portuguese local governments with respect to policy instruments and institutions. Estimation results clearly reveal the opportunistic behaviour of local governments. In pre-electoral periods, they increase total expenditures and change their composition favouring items that are highly visible to the electorate. This behaviour is consistent with an effort to signal competence and increase chances of re-election. Copyright Springer Science+Business Media, LLC 2007

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File URL: http://hdl.handle.net/10.1007/s11127-006-9104-2
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Publisher Info
Article provided by Springer in its journal Public Choice.

Volume (Year): 131 (2007)
Issue (Month): 1 (April)
Pages: 45-64
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:kap:pubcho:v:131:y:2007:i:1:p:45-64

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Web page: http://www.springerlink.com/link.asp?id=100332

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Related research
Keywords: Political business cycles; Public finance; Local governments; Elections; Portugal;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  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, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
  2. Rosenberg, Jacob, 1992. " Rationality and the Political Business Cycle: The Case of Local Government," Public Choice, Springer, vol. 73(1), pages 71-81, January.
  3. Baleiras, Rui Nuno & Costa, Jose da Silva, 2001. "To Be or Not To Be in Office Again, That is the Question: Political Business Cycles with Local Governments," FEUNL Working Paper Series wp402, Universidade Nova de Lisboa, Faculdade de Economia. [Downloadable!]
  4. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," NBER Working Papers 1838, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Timothy Besley & Anne Case, 2003. "Political Institutions and Policy Choices: Evidence from the United States," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 7-73, March.
    Other versions:
  6. Kenneth Rogoff, 1990. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Blackwell Publishing, vol. 42(2), pages 169-90, April. [Downloadable!] (restricted)
  8. Per Pettersson-Lidbom, 2001. "An Empirical Investigation of the Strategic Use of Debt," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 570-583, June. [Downloadable!] (restricted)
  9. Linda Gonçalves Veiga, 2002. "The Political Economy of Local Governments' Expenditures," NIPE Working Papers 8/2002, NIPE - Universidade do Minho. [Downloadable!]
  10. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July. [Downloadable!] (restricted)
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  11. Alesina, Alberto & Tabellini, Guido, 1988. "Credibility and politics," European Economic Review, Elsevier, vol. 32(2-3), pages 542-550, March. [Downloadable!] (restricted)
  12. Allan Drazen & Marcela Eslava, 2005. "Electoral Manipulation via Expenditure Composition: Theory and Evidence," NBER Working Papers 11085, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August. [Downloadable!] (restricted)
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  14. Francisco José Veiga & Linda Gonçalves Veiga, 2000. "Popularity functions, partisan effects and support in Parliament," NIPE Working Papers 8/2001, NIPE - Universidade do Minho. [Downloadable!]
    Other versions:
  15. Francisco JosÈ Veiga & Linda GonÁalves Veiga, 2004. "The Determinants of Vote Intentions in Portugal," Public Choice, Springer, vol. 118(3_4), pages 341-364, 03. [Downloadable!]
    Other versions:
  16. Frank Windmeijer, 2000. "A finite sample correction for the variance of linear two-step GMM estimators," IFS Working Papers W00/19, Institute for Fiscal Studies. [Downloadable!]
  17. Galli, Emma & Rossi, Stefania P S, 2002. " Political Budget Cycles: The Case of the Western German Lander," Public Choice, Springer, vol. 110(3-4), pages 283-303, March. [Downloadable!] (restricted)
  18. Blais, Andre & Nadeau, Richard, 1992. " The Electoral Budget Cycle," Public Choice, Springer, vol. 74(4), pages 389-403, December.
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Akhmedov Akhmed, . "Human capital and political business cycles," EERC Working Paper Series 03-213e, EERC Research Network, Russia and CIS. [Downloadable!]
  2. GONZALEZ, Paula & HINDRIKS, Jean & LOCKWOOD, Ben & PORTEIRO, Nicolas, 2006. "Political budget cycles and fiscal decentralization," CORE Discussion Papers 2006031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
    Other versions:
  3. Jon H. Fiva & Gisle James Natvik, 2009. "Do Re-election Probabilities Influence Public Investment?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  4. Akhmed Akhmedov, 2006. "Human Capital and Political Business Cycles," Working Papers w0087, Center for Economic and Financial Research (CEFIR). [Downloadable!]
  5. Marco Bonomo & Cristina Terra, 2008. "Political Business Cycles through Lobbying," THEMA Working Papers 2008-18, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise. [Downloadable!]
  6. Reichenvater, Arno, 2007. "Business Cycles, Political Incentives and the Macroeconomy: Comparison of Models," MPRA Paper 5527, University Library of Munich, Germany. [Downloadable!]
  7. Toke S. Aidt & Francisco José Veiga & Linda Gonçalves Veiga, 2008. "Election Results And Opportunistic Policies: An Integrated Approach," GEE Papers 0007, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação, revised Apr 2008. [Downloadable!]
    Other versions:
  8. Dahlberg, Matz & Mörk, Eva, 2008. "Is there an election cycle in public employment? Separating time effects from election year effects," Working Paper Series 2008:3, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
    Other versions:
  9. Marcela Eslava, 2006. "The Political Economy of Fiscal Policy: Survey," RES Working Papers 4487, Inter-American Development Bank, Research Department. [Downloadable!]
  10. Linda Veiga & Maria Pinho, 2007. "The political economy of intergovernmental grants: Evidence from a maturing democracy," Public Choice, Springer, vol. 133(3), pages 457-477, December. [Downloadable!] (restricted)
  11. Sakurai, Sergio N. & Menezes, Naercio A., 2008. "Fiscal policy and reelection in Brazilian municipalities," Ibmec Working Papers wpe_115, Ibmec Working Paper, Ibmec São Paulo. [Downloadable!]
  12. Maria Manuel Pinho, 2008. "The political economy of public spending composition: evidence from a panel of OECD countries," FEP Working Papers 295, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
  13. Akhmedov Akhmed, 2006. "Human Capital and Political Business Cycles," EERC Working Paper Series 06-02e, EERC Research Network, Russia and CIS. [Downloadable!]
  14. Linda Gonçalves Veiga & Maria Manuel Pinho, 2005. "The Political Economy of Portuguese Intergovernmental Grants," NIPE Working Papers 8/2005, NIPE - Universidade do Minho. [Downloadable!]
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