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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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Cited by:
  1. Cunha, Alexandre B. & Ornelas, Emanuel, 2014. "Political Competition and the Limits of Political Compromise," CEPR Discussion Papers 9909, C.E.P.R. Discussion Papers.
  2. Fossen, Frank M. & Freier, Ronny & Martin, Thorsten, 2014. "Race to the debt trap? Spatial econometric evidence on debt in German municipalities," Discussion Papers 2014/1, Free University Berlin, School of Business & Economics.
  3. Jon H. Fiva & Gisle James Natvik, 2009. "Do re-election probabilities influence public investment?," Working Paper 2009/13, Norges Bank.
  4. Michael Funke & Yu-Fu Chen, 2009. "Booms, Recessions and Financial Turmoil: A Fresh Look at Investment Decisions under Cyclical Uncertainty," Quantitative Macroeconomics Working Papers 20908, Hamburg University, Department of Economics.
  5. Solé-Ollé, Albert & Viladecans-Marsal, Elisabet, 2012. "Lobbying, political competition, and local land supply: Recent evidence from Spain," Journal of Public Economics, Elsevier, vol. 96(1), pages 10-19.
  6. Marina Azzimonti, 2013. "The dynamics of public investment under persistent electoral advantage," Working Papers 13-43, Federal Reserve Bank of Philadelphia.

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