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Do Re-election Probabilities Influence Public Investment?

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  • Fiva, Jon H.

    ()
    (Dept. of Economics, University of Oslo)

  • Natvik, Gisle James

    ()
    (Norges Bank)

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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File URL: https://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2009/Memo-16-2009.pdf
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Bibliographic Info

Paper provided by Oslo University, Department of Economics in its series Memorandum with number 16/2009.

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Length: 49 pages
Date of creation: 15 Aug 2009
Date of revision:
Publication status: Forthcoming as Fiva, Jon H. and Gisle James Natvik, 'Do Re-election Probabilities Influence Public Investment?' in Public Choice, 2013.
Handle: RePEc:hhs:osloec:2009_016

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Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
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Web page: http://www.oekonomi.uio.no/indexe.html
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Keywords: Political Economics; Strategic Capital Accumulation; Identifying Popularity Shocks;

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Citations

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Cited by:
  1. 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.
  2. Marina Azzimonti, 2013. "The dynamics of public investment under persistent electoral advantage," Working Papers 13-43, Federal Reserve Bank of Philadelphia.
  3. Albert Solé-Ollé & Elisabet Viladecans-Marsal, 2010. "Lobbying, political competition, and local land supply: recent evidence from Spain," Working Papers 2010/45, Institut d'Economia de Barcelona (IEB).
  4. Yu-Fu Chen & Michael Funke, 2010. "Booms, Recessions And Financial Turmoil: A Fresh Look At Investment Decisions Under Cyclical Uncertainty," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(s1), pages 290-317, 07.
  5. Jon H. Fiva & Gisle James Natvik, 2009. "Do Re-election Probabilities Influence Public Investment?," CESifo Working Paper Series 2709, CESifo Group Munich.
  6. Alexandre B. Cunha & Emanuel Ornelas, 2014. "Political Competition and the Limits of Political Compromise," CEP Discussion Papers dp1263, Centre for Economic Performance, LSE.

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