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Election Results And Opportunistic Policies: An Integrated Approach

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Author Info

  • Toke S. Aidt

    ()
    (University of Cambridge, Faculty of Economics)

  • Francisco José Veiga

    ()
    (Universidade do Minho and NIPE, Escola de Economia e Gestão)

  • Linda Gonçalves Veiga

    ()
    (Universidade do Minho and NIPE, Escola de Economia e Gestão)

Abstract

The literature on political business cycles suggests that politicians systematically manipulate economic and fiscal conditions before elections. The literature on vote and popularity functions suggests that economic conditions systematically affect election outcomes. This paper integrates these two strands of literature. We use Rogoff (1990)’s model of the rational political business cycle to derive the two-way relationship between the win-margin of the incumbent politician and the size of the opportunistic distortion of fiscal policy. This relationship is estimated, for a panel of 275 Portuguese municipalities (from 1979 to 2001), as a system of simultaneous equations (by GMM). The results show that (1) opportunism pays off, leading to a larger win-margin for the incumbent; (2) incumbents behave more opportunistically when their win-margin is small. These results are consistent with the theoretical model.

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File URL: http://www.gee.min-economia.pt/RePEc/WorkingPapers/avv.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação in its series GEE Papers with number 0007.

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Length: 37 pages
Date of creation: Apr 2008
Date of revision: Apr 2008
Handle: RePEc:mde:wpaper:0007

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Keywords: Voting and popularity functions; opportunism; rational political business cycles; local government; system estimation; Portugal.;

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  1. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-party System as a Repeated Game," Scholarly Articles 4552531, Harvard University Department of Economics.
  2. Francisco José Veiga & Linda Gonçalves Veiga, 2004. "Political Business Cycles at the Municipal Level," NIPE Working Papers 4/2004, NIPE - Universidade do Minho.
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Cited by:
  1. Jon Fiva & Gisle Natvik, 2013. "Do re-election probabilities influence public investment?," Public Choice, Springer, vol. 157(1), pages 305-331, October.
  2. Bernardino Benito & Francisco Bastida & Cristina Vicente, 2013. "Municipal elections and cultural expenditure," Journal of Cultural Economics, Springer, vol. 37(1), pages 3-32, February.

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