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The Political Budget Cycle is Where You Can't See It: Transparency and Fiscal Manipulation

Author

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  • James E. Alt

    (Department of Government, Harvard University)

  • David Dreyer Lassen

    (Institute of Economics, University of Copenhagen)

Abstract

We investigate the effects of fiscal transparency and political polarization on the prevalence of electoral cycles in fiscal balance. The recent political economy literature on electoral cycles identifies such cycles mainly in weak and recent democracies. In contrast, we show, conditioning on a new index of institutional fiscal transparency, that electoral cycles in fiscal balance are a feature also of advanced industrialized economies. Using a sample of nineteen OECD countries in the 1990’s, we identify a persistent pattern of electoral cycles in low(er) transparency countries, while no such cycles can be observed in high(er) transparency countries. Furthermore, we find, in accordance with recent theory, that electoral cycles are larger in more politically polarized countries.

Suggested Citation

  • James E. Alt & David Dreyer Lassen, 2005. "The Political Budget Cycle is Where You Can't See It: Transparency and Fiscal Manipulation," EPRU Working Paper Series 05-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:epruwp:05-03
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    References listed on IDEAS

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    Cited by:

    1. Mark Mink & Jakob de Haan & Jakob de Haan, 2005. "Has the Stability and Growth Pact Impeded Political Budget Cycles in the European Union?," CESifo Working Paper Series 1532, CESifo.
    2. Roel M.W.J. Beetsma & Frederick van der Ploeg, 2007. "Partisan Public Investment and Debt: The Case for Fiscal Restrictions," Economics Working Papers ECO2007/37, European University Institute.
    3. van der Ploeg, Frederick & Beetsma, Roel, 2007. "The Political Economy of Public Investment," CEPR Discussion Papers 6090, C.E.P.R. Discussion Papers.
    4. Marko Klašnja, 2008. "Electoral Rules, Forms of Government, and Political Budget Cycles in Transition Countries," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 55(2), pages 185-218, June.
    5. Yves M. Tehou TEKENG & Mesbah Fathy SHARAF, 2015. "Fiscal Transparency, Measurement and Determinants: Evidence from 27 Developing Countries," Journal of Economics and Political Economy, KSP Journals, vol. 2(1), pages 69-91, March.
    6. Marco Buti & João Nogueira Martins & Alessandro Turrini, 2007. "From Deficits to Debt and Back: Political Incentives under Numerical Fiscal Rules," CESifo Economic Studies, CESifo, vol. 53(1), pages 115-152, March.
    7. José Antonio Pena Ramos & César Vargas Díaz & Iván Medina Iborra, 2012. "Difusión y comparabilidad de la información económico -financiera on -line : el caso de Iberoamérica," Revista Facultad de Ciencias Económicas, Universidad Militar Nueva Granada, June.
    8. Meloni, Osvaldo, 2011. "Budget Manipulation and Vertical Fiscal Imbalance," MPRA Paper 50694, University Library of Munich, Germany.

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    More about this item

    Keywords

    fiscal transparency; political polarization; fiscal policy; budget deficits; political budget cycles; electoral policy cycles;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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