Electoral Cycles in Public Expenditures: Evidence from Czech Local Governments

This paper analyzes local political cycle in Czech municipalities over the period between 1997 and 2013. We apply the system GMM and the difference GMM estimators to identify distortion in current and capital expenditures per capita in electoral and pre-electoral years, while focusing on various spending groups (infrastructure, leisure, housing, education, etc.). We also test specific effects of local governments' characteristics (partisanship, strength, experience). In general, municipalities increase capital spending (primarily on infrastructure, housing, leisure activities) and decrease current spending (administration) before elections. Rightist governments target leisure activities and save more on administration, whereas leftist governments target current spending on social services. Stronger governments and those with newly elected mayors have lower incentive to create an electoral cycle. Voters' involvement in local policies and also success of ruling local (and parliamentary) parties in nat ional parliamentary elections diminish local electoral cycles.