Where Does the Political Budget Cycle Really Come From?
AbstractWhereas a political budget cycle was once thought to be a phenomenon of less-developed economies, some recent studies find such a cycle in a large cross-section of both developed and developing countries. We find that this result is driven by the experience of ‘new democracies’, where fiscal manipulation may be effective because of lack of experience with electoral politics or lack of information that voters in more established democracies use. The strong budget cycle in those countries accounts for the finding of a budget cycle in larger samples that include these countries. Once these countries are removed from the larger sample, the political budget cycle disappears. Our findings may reconcile two contradictory views of pre-electoral manipulation, one arguing it is a useful instrument to gain voter support and a widespread empirical phenomenon, the other arguing that voters punish rather than reward fiscal manipulation.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4049.
Date of creation: Sep 2003
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Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
This paper has been announced in the following NEP Reports:
- NEP-POL-2003-10-05 (Positive Political Economics)
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