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File URL: https://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2009/Memo-16-2009.pdf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

Contact details of provider:
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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Related research

Keywords: Political Economics; Strategic Capital Accumulation; Identifying Popularity Shocks;

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Citations

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Cited by:
  1. Yu-Fu Chen & Michael Funke, 2009. "Booms, Recessions and Financial Turmoil: A Fresh Look at Investment Decisions under Cyclical Uncertainty," Dundee Discussion Papers in Economics 225, Economic Studies, University of Dundee.
  2. Jon Fiva & Gisle James Natvik, 2010. "Do re-election probabilities influence public investment?," 2010 Meeting Papers 334, Society for Economic Dynamics.
  3. Solé-Ollé, Albert & Viladecans-Marsal, Elisabet, 2012. "Lobbying, political competition, and local land supply: Recent evidence from Spain," Journal of Public Economics, Elsevier, vol. 96(1), pages 10-19.
  4. Alexandre B. Cunha & Emanuel Ornelas, 2014. "Political Competition and the Limits of Political Compromise," CESifo Working Paper Series 4737, CESifo Group Munich.
  5. 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.
  6. Marina Azzimonti, 2013. "The dynamics of public investment under persistent electoral advantage," Working Papers 13-43, Federal Reserve Bank of Philadelphia.

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