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Do re-election probabilities influence public investment?

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Author Info
Jon H. Fiva () (University of Oslo)
Gisle James Natvik () (Norges Bank (Central Bank of Norway))

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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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Publisher 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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Related research
Keywords: Political economics; Strategic capital accumulation; Identifying popularity shocks;

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Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H40 - Public Economics - - Publicly Provided Goods - - - General
H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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