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Political business cycles at the municipal level

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  • Linda Veiga

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  • Francisco Veiga

    ()

Abstract

The political article tests for rational political business cycles models on an unexplored and large data set of Portuguese municipalities. This data allows for a clean test of the models due to its high level of detail on expenditure items, an exogenous fixed election schedule and the homogeneity of local governments with respect to policy instruments and institutions. Estimation results clearly reveal the opportunistic behaviour of local governments, that in pre-electoral periods, increase expenditure on items highly visible to the electorate such as roads and street construction, in an effort to signal competence and increase their chances of re-election. JEL classification: H72, D72, D78 Keywords: political business cycles, public finance, local governments

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa04p427.

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Date of creation: Aug 2004
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Handle: RePEc:wiw:wiwrsa:ersa04p427

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  1. Besley, Timothy J. & Case, Anne, 2002. "Political Institutions and Policy Choices: Evidence from the United States," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3498, C.E.P.R. Discussion Papers.
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  7. Francisco José Veiga & Linda Gonçalves Veiga, 2000. "Popularity functions, partisan effects and support in Parliament," NIPE Working Papers, NIPE - Universidade do Minho 8/2001, NIPE - Universidade do Minho.
  8. Baleiras, Rui Nuno & da Silva Costa, Jose, 2004. "To be or not to be in office again: an empirical test of a local political business cycle rationale," European Journal of Political Economy, Elsevier, Elsevier, vol. 20(3), pages 655-671, September.
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  10. Linda Gonçalves Veiga, 2002. "The Political Economy of Local Governments' Expenditures," NIPE Working Papers, NIPE - Universidade do Minho 8/2002, NIPE - Universidade do Minho.
  11. Allan Drazen & Marcela Eslava, 2005. "Electoral Manipulation via Expenditure Composition: Theory and Evidence," NBER Working Papers 11085, National Bureau of Economic Research, Inc.
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  16. Alesina, Alberto & Tabellini, Guido, 1988. "Credibility and politics," European Economic Review, Elsevier, Elsevier, vol. 32(2-3), pages 542-550, March.
  17. Baleiras, Rui Nuno & Costa, Jose da Silva, 2001. "To Be or Not To Be in Office Again, That is the Question: Political Business Cycles with Local Governments," FEUNL Working Paper Series, Universidade Nova de Lisboa, Faculdade de Economia wp402, Universidade Nova de Lisboa, Faculdade de Economia.
  18. Cukierman, Alex & Meltzer, Allan H, 1986. "A Positive Theory of Discretionary Policy, the Cost of Democratic Government and the Benefits of a Constitution," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 24(3), pages 367-88, July.
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  20. Per Pettersson-Lidbom, 2001. "An Empirical Investigation of the Strategic Use of Debt," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 109(3), pages 570-583, June.
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