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Electoral Opportunism and Vertical Fiscal Imbalance

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  • Osvaldo Meloni

Abstract

Evidence of political budget cycles from cross-country studies has been rationalized as coming from the voters' cost to process the available information and asymmetric information. This explanation has also been adopted in most cross-province studies, leaving aside variables related to the incentive structure of fiscal federalism. This paper investigates electorally induced fiscal fluctuations in Argentina for the period 1985–2007. Province-level dynamic panel data reveal that vertical fiscal imbalances in subnational districts fuel fiscal expansion and changes in expenditure composition, favoring current expenditure to the detriment of investment, in election years. Vertical fiscal imbalances make electoral opportunism cheaper and more profitable.

Suggested Citation

  • Osvaldo Meloni, 2016. "Electoral Opportunism and Vertical Fiscal Imbalance," Journal of Applied Economics, Taylor & Francis Journals, vol. 19(1), pages 145-167, May.
    • Handle: RePEc:taf:recsxx:v:19:y:2016:i:1:p:145-167
    DOI: 10.1016/S1514-0326(16)30006-X
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    Cited by:

    1. Lin, Boqiang & Zhou, Yicheng, 2021. "Does fiscal decentralization improve energy and environmental performance? New perspective on vertical fiscal imbalance," Applied Energy, Elsevier, vol. 302(C).
    2. Osvaldo Meloni, 2018. "s there an electorally-motivated crime rate cycle? Evidence from Argentina," Economics Bulletin, AccessEcon, vol. 38(2), pages 1102-1110.
    3. Pablo Garofalo & Daniel Lema & Jorge M. Streb, 2020. "Political budget cycles and voting within a federal country: The influence of political alignment," Economics and Politics, Wiley Blackwell, vol. 32(2), pages 305-334, July.
    4. José J. Bercoff & Osvaldo Meloni & Juan Manuel Tabuenca, 2020. "Unusual electoral systems and political hegemony. Evidence from the argentine subnational districts," Asociación Argentina de Economía Política: Working Papers 4375, Asociación Argentina de Economía Política.
    5. Liangliang Liu & Wenqing Zhang, 2022. "Vertical fiscal imbalance and government spending on science and technology in China," Economic Change and Restructuring, Springer, vol. 55(3), pages 1953-1971, August.
    6. Pablo Garofalo & Daniel Lema & Jorge M. Streb, 2016. "Party alignment, political budget cycles and vote within a federal country," CEMA Working Papers: Serie Documentos de Trabajo. 601, Universidad del CEMA, revised May 2017.
    7. Alessio Mitra & Athanasios Chymis, 2022. "Federalism, but how? The impact of vertical fiscal imbalance on economic growth. Evidence from Belgium," Economics and Politics, Wiley Blackwell, vol. 34(2), pages 322-350, July.
    8. José J. Bercoff & Osvaldo Meloni & Juan Manuel Tabuenca, 2024. "Tilting the playing field. Do Double Simultaneous Voting System and Apparentment Lists contribute to subnational party hegemony?," Working Papers 302, Red Nacional de Investigadores en Economía (RedNIE).
    9. Sarnetska, Yana, 2020. "Priorities For The Distribution Of Interbudgetary Transfers Under The Conditions Of Fiscal Decentralization In Ukraine," EUREKA: Social and Humanities, Scientific Route OÜ, issue 1, pages 35-45.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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