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Do re-election probabilities influence public investment?

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  • Jon H. Fiva

    ()
    (University of Oslo)

  • Gisle James Natvik

    ()
    (Norges Bank (Central Bank of Norway))

Abstract

We identify exogenous variation in incumbent policymakers' re-election probabilities and explore empirically how this variation affects the incumbents' investment in physical capital. Our results indicate that a higher re-election probability leads to higher investments, particularly in the purposes preferred more strongly by the incumbents. This aligns with a theoretical framework where political parties disagree about which public goods to produce using labor and predetermined public capital. Key for the consistency between data and theory is to account for complementarity between physical capital and flow variables in government production.

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Bibliographic Info

Paper provided by Norges Bank in its series Working Paper with number 2009/13.

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Length: 47 pages
Date of creation: 11 Aug 2009
Date of revision:
Handle: RePEc:bno:worpap:2009_13

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Keywords: Political economics; Strategic capital accumulation; Identifying popularity shocks;

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Citations

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Cited by:
  1. Yu-Fu Chen & Michael Funke, 2009. "Booms, Recessions and Financial Turmoil: A Fresh Look at Investment Decisions under Cyclical Uncertainty," CESifo Working Paper Series 2759, CESifo Group Munich.
  2. Jon H. Fiva & Gisle James Natvik, 2009. "Do Re-election Probabilities Influence Public Investment?," CESifo Working Paper Series 2709, CESifo Group Munich.
  3. Albert Sole-Olle & Elisabet Viladecans-Marsal, 2010. "Lobbying, political competition, and local land supply: recent evidence from Spain," Working Papers in Economics 248, Universitat de Barcelona. Espai de Recerca en Economia.
  4. Marina Azzimonti, 2012. "The dynamics of public investment under persistent electoral advantag," 2012 Meeting Papers 91, Society for Economic Dynamics.
  5. Frank M. Fossen & Ronny Freier & Thorsten Martin, 2014. "Race to the Debt Trap? Spatial Econometric Evidence on Debt in German Municipalities," Discussion Papers of DIW Berlin 1358, DIW Berlin, German Institute for Economic Research.
  6. Cunha, Alexandre B. & Ornelas, Emanuel, 2014. "Political Competition and the Limits of Political Compromise," CEPR Discussion Papers 9909, C.E.P.R. Discussion Papers.

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