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Do Electoral Cycles Differ Across Political Systems?

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Author Info
Torsten Persson
Guido Tabellini

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Abstract

Do fiscal policy variables — overall spending, revenue, deficits and welfare-state spending — display systematic patterns in the vicinity of elections? And do such electoral cycles differ among political systems? We investigate these questions in a data set encompassing sixty democracies from 1960-98. Without conditioning on the political system, we find that taxes are cut before elections, painful fiscal adjustments are postponed until after the elections, while welfare-state spending displays no electoral cycle. Our subsequent results show that the pre-election tax cuts is a universal phenomenon. The post-election fiscal adjustments (spending cuts, tax hikes and rises in surplus) are, however, only present in presidential democracies. Moreover, majoritarian electoral rules alone are associated with pre-electoral spending cuts, while proportional electoral rules are associated with expansions of welfare spending both before and after elections.

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Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 232.

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Date of creation: 2003
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Handle: RePEc:igi:igierp:232

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Persson, Torsten & Tabellini, Guido, 1997. "Political Economics and Macroeconomic Policy," CEPR Discussion Papers 1759, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Torsten Persson & Guido Tabellini, 2004. "Constitutions and Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 18(1), pages 75-98, Winter. [Downloadable!] (restricted)
  4. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," NBER Working Papers 1838, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Tim Besley, 2002. "Political institutions and policy choices: evidence from the United States," IFS Working Papers W02/13, Institute for Fiscal Studies. [Downloadable!]
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  6. Persson, Torsten & Roland, Gerard & Tabellini, Guido, 1997. "Separation of Powers and Political Accountability," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1163-1202, November.
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  7. Torsten Persson & Gerard Roland & Guido Tabellini, 2000. "Comparative Politics and Public Finance," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1121-1161, December. [Downloadable!] (restricted)
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  8. Kenneth Rogoff, 1990. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Block, Steven A., 2002. "Political business cycles, democratization, and economic reform: the case of Africa," Journal of Development Economics, Elsevier, vol. 67(1), pages 205-228, February. [Downloadable!] (restricted)
  10. Alessandro Lizzeri & Nicola Persico, 2001. "The Provision of Public Goods under Alternative Electoral Incentives," American Economic Review, American Economic Association, vol. 91(1), pages 225-239, March. [Downloadable!] (restricted)
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  11. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October. [Downloadable!] (restricted)
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  12. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bonomo, Marco Antônio Cesar & Terra, Maria Cristina T., 2005. "Special Interests and Political Business Cycles," Economics Working Papers (Ensaios Economicos da EPGE) 597, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
  2. J Stephen Ferris & Soo-Bin ParkFF & Stanley L. Winer, 2006. "Political Competition and Convergence to Fundamentals: With Application to the Political Business Cycle and the Size of Government," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  3. Loren Brandt & Matthew Turner, 2003. "The Usefulness of Corruptible Elections," William Davidson Institute Working Papers Series 2003-602, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  4. Paula González & Jean Hindriks & Ben Lockwood & Nicolás Porteiro, 2006. "Political Budget Cycles and Fiscal Decentralization," Working Papers 06.13, Universidad Pablo de Olavide, Department of Economics. [Downloadable!]
    Other versions:
  5. Marcos Yamada Nakaguma & Siegfried Bender, 2004. "A Emenda Da Reeleição E A Lei De Responsabilidade Fiscal: Impactos Sobre Ciclos Políticos E Performance Fiscal Dos Estados (1986-2002)," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting] 025, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
  6. Christian Fahrholz & Philipp Mohl, 2003. "Fiscal and Monetary Policy in Belgium, France, Germany, Luxembourg, and The Netherlands," Eastward Enlargement of the Euro-zone Working Papers wp17c, Free University Berlin, Jean Monnet Centre of Excellence, revised 01 Apr 2003. [Downloadable!]
  7. Jörg Döpke & Christian Pierdzioch, 2004. "Politics and the Stock Market — Evidence from Germany," Kiel Working Papers 1203, Kiel Institute for the World Economy. [Downloadable!]
  8. Jorge M. Streb & Alejandro Saporiti, 2003. "Separation of Powers and Political Budget Cycles," CEMA Working Papers: Serie Documentos de Trabajo. 251, Universidad del CEMA. [Downloadable!]
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  9. Adi Brender & Allan Drazen, 2004. "Political Budget Cycles in New versus Established Democracies," NBER Working Papers 10539, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. J. Stephen Ferris & Soo-Bin Park & Stanley L. Winer, 2005. "Political Competition and Convergence to Fundamentals: With Application to the Politcal Business Cycle and the Size of the Public Sector," Carleton Economic Papers 05-09, Carleton University, Department of Economics. [Downloadable!]
  11. Brender, Adi & Drazen, Allan, 2003. "Where Does the Political Budget Cycle Really Come From?," CEPR Discussion Papers 4049, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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