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Separation of Powers and Political Budget Cycles

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  • Jorge M. Streb
  • Alejandro Saporiti

Abstract

From a theoretical viewpoint, political budget cycles (PBC) arise in equilibrium when rational voters are imperfectly informed about the incumbent's competency and the incumbent enjoys discretionary power over the budget. This paper focuses on the second condition, examining how executive discretion is affected by the budgetary process under separation of powers. We specifically model PBC in the composition of government spending. The main result is that effective checks and balances in the budgetary process curb PBC. The institutional features of the executive-legislature bargaining game, namely, the actual agenda-setting authority, the status quo location and the degree of legislative oversight and control of the implementation of the budgetary law, play critical roles for the existence and the size of PBC. These results are consistent with recent empirical findings, which show that PBC are more pronounced in developing countries, where there are also less effective checks and balances.

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Bibliographic Info

Paper provided by Universidad del CEMA in its series CEMA Working Papers: Serie Documentos de Trabajo. with number 251.

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Date of creation: Nov 2003
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Handle: RePEc:cem:doctra:251

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Keywords: Rational political budget cycles; budget composition; separation of powers; checks and balances; budgetary process.;

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  9. Ricardo Hausmann & Alberto Alesina & Rudolf Hommes & Ernesto H. Stein, 1998. "Budget Institutions and Fiscal Performance in Latin America," Research Department Publications 4160, Inter-American Development Bank, Research Department.
  10. Torsten Persson & Guido Tabellini, 2003. "Do Electoral Cycles Differ Across Political Systems?," Working Papers 232, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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Citations

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Cited by:
  1. Jorge M. Streb & Gustavo F. Torrens, 2009. "Making rules credible: Divided government and political budget cycles," CEMA Working Papers: Serie Documentos de Trabajo. 395, Universidad del CEMA.
  2. Daniel Lema & Jorge M. Streb, 2013. "Ciclos electorales en política fiscal," CEMA Working Papers: Serie Documentos de Trabajo. 514, Universidad del CEMA.
  3. Vincenzo Bove & Georgios Efthyvoulou, 2013. "Political Cycles in Public Expenditure: Butter vs. Guns," Working Papers 2013016, The University of Sheffield, Department of Economics.
  4. Marek Hanusch & Daniel Magleby, 2014. "Popularity, polarization, and political budget cycles," Public Choice, Springer, vol. 159(3), pages 457-467, June.
  5. Batool, Irem & Sieg, Gernot, 2009. "Pakistan, politics and political business cycles," Economics Department Working Paper Series 7, Technische Universität Braunschweig, Economics Department.
  6. Jorge M. Streb, 2011. "Estabilización económica e incentivos políticos," CEMA Working Papers: Serie Documentos de Trabajo. 461, Universidad del CEMA.
  7. James E. Alt & David Dreyer Lassen, 2005. "The Political Budget Cycle is Where You Can't See It: Transparency and Fiscal Manipulation," EPRU Working Paper Series 05-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  8. Niklas Potrafke, 2006. "Political Effects on the Allocation of Public Expenditures: Empirical Evidence from OECD Countries," Discussion Papers of DIW Berlin 653, DIW Berlin, German Institute for Economic Research.
  9. Marek Hanusch, 2012. "Coalition incentives for political budget cycles," Public Choice, Springer, vol. 151(1), pages 121-136, April.
  10. Margarita Katsimi & Vassilis Sarantides, 2012. "Do elections affect the composition of fiscal policy in developed, established democracies?," Public Choice, Springer, vol. 151(1), pages 325-362, April.
  11. Margarita Katsimi & Vassilis Sarantides, 2010. "Do Elections Affect the Composition of Fiscal Policy?," CESifo Working Paper Series 2908, CESifo Group Munich.
  12. Cameron Shelton, 2014. "Legislative budget cycles," Public Choice, Springer, vol. 159(1), pages 251-275, April.

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