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Elections and Governments` Behaviour - An Application to Portuguese Municipalities

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Abstract

Governments have an important role at defining the course of the economy. It is crucial, therefore, to understand their behaviour, their motivations and the factors underlying their policies, once the economy evolution can not be dissociated from the institutional and political background. This paper tests the relation between the economy and politics at the local administration level. Specifically, using a Portuguese municipalities`panel dataset, it tests opportunistics and partisan behaviour of local governments, either on instruments of local economic policy or on local economic outcomes. The main findings are: (i) local governments adopt an opportunistics behaviour, observed both on instruments and outcomes; and (ii) there is no evidence of partisan behaviour whatsoever. These results lead to important issues at light of the Stability and Growth Pact requirements.

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Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 8/2004.

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Date of creation: 2004
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Handle: RePEc:nip:nipewp:8/2004

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Keywords: political business cycles; political economy; government behaviour;

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  1. Harrington, Joseph E, Jr, 1993. "Economic Policy, Economic Performance, and Elections," American Economic Review, American Economic Association, vol. 83(1), pages 27-42, March.
  2. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, MIT Press, vol. 102(3), pages 651-78, August.
  3. Frey, Bruno S & Schneider, Friedrich, 1978. "An Empirical Study of Politico-Economic Interaction in the United States," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 174-83, May.
  4. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
  5. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-party System as a Repeated Game," Scholarly Articles 4552531, Harvard University Department of Economics.
  6. Torsten Persson & Guido Tabellini, 1999. "Political Economics and Public Finance," NBER Working Papers 7097, National Bureau of Economic Research, Inc.
  7. Cukierman, Alex & Alesina, Alberto, 1990. "The Politics of Ambiguity," Scholarly Articles 4552530, Harvard University Department of Economics.
  8. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
  9. Kenneth Rogoff & Anne Sibert, 1986. "Elections and Macroeconomic Policy Cycles," NBER Working Papers 1838, National Bureau of Economic Research, Inc.
  10. MacRae, C Duncan, 1977. "A Political Model of the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 239-63, April.
  11. Rosenberg, Jacob, 1992. " Rationality and the Political Business Cycle: The Case of Local Government," Public Choice, Springer, vol. 73(1), pages 71-81, January.
  12. Allers, Maarten & de Haan, Jakob & Sterks, Cees, 2001. " Partisan Influence on the Local Tax Burden in the Netherlands," Public Choice, Springer, vol. 106(3-4), pages 351-63, March.
  13. Frank Windmeijer, 2000. "A finite sample correction for the variance of linear two-step GMM estimators," IFS Working Papers W00/19, Institute for Fiscal Studies.
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