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Roads or Schools? Political Budget Cycles with different types of voters

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  • Lopez Uribe, Maria del Pilar
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    Abstract

    Using a new Colombian data set (1830-2000), we analyze how changes in the electoral legislation with regard to the characteristics of voters (in terms of education and income levels) has affected fiscal policy in electoral times. In line with economic theory, we show that after the law was reformed in 1936 the composition of the expenditure shifted towards social spending (like education, health, and welfare benefits) but there was decreased spending on infrastructure and investment projects (like roads). Consistent with the literature, we also find: 1.The timing and the size of the political budget cycles changed after 1936 and 2.After 1936 there was a shift in the funding mechanisms from indirect tax revenues to more debt.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 50529.

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    Date of creation: 2013
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    Handle: RePEc:pra:mprapa:50529

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    Keywords: Political Budget Cycles; Expenditure composition; Revenue composition; Elections; Colombia;

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    1. Steven D. Levitt, 1995. "Using Electoral Cycles in Police Hiring to Estimate the Effect of Policeon Crime," NBER Working Papers 4991, National Bureau of Economic Research, Inc.
    2. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
    3. Kneebone, R.D. & McKenzie, K.J., 1998. "Electoral and Partisan Cycles in Fiscal Policy: an Examination of Canadian Provinces," Papers 98-06, Calgary - Department of Economics.
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    8. Ebrima Faal, 2007. "Political Budget Cycles in Papua New Guinea," IMF Working Papers 07/219, International Monetary Fund.
    9. Lorena Barberia & George Avelino, 2011. "Do political budget cycles differ in Latin American democracies?," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
    10. Nordhaus, William D, 1975. "The Political Business Cycle," Review of Economic Studies, Wiley Blackwell, vol. 42(2), pages 169-90, April.
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    12. Drazen, Allan & Eslava, Marcela, 2010. "Electoral manipulation via voter-friendly spending: Theory and evidence," Journal of Development Economics, Elsevier, vol. 92(1), pages 39-52, May.
    13. Shi, Min & Svensson, Jakob, 2006. "Political budget cycles: Do they differ across countries and why?," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1367-1389, September.
    14. Schuknecht, Ludger, 2000. " Fiscal Policy Cycles and Public Expenditure in Developing Countries," Public Choice, Springer, vol. 102(1-2), pages 115-30, January.
    15. Brender, Adi & Drazen, Allan, 2005. "Political budget cycles in new versus established democracies," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1271-1295, October.
    16. Schuknecht, Ludger, 1996. "Political Business Cycles and Fiscal Policies in Developing Countries," Kyklos, Wiley Blackwell, vol. 49(2), pages 155-70.
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