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Do Changes in Democracy Affect the Political Budget Cycle? Evidence from Mexico

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  • Gonzalez, Maria de los Angeles

Abstract

The previous empirical literature in opportunistic election cycles attempts to identify whether there is a significant impact of the election calendar on economic policy. The econometric analysis implemented in this paper goes a step further, seeking to test whether a country's time-varying degree of democracy affects the way in which economic policy is chosen as elections approach. A simple econometric model is estimated for the case of Mexico's fiscal policy between 1957 and 1997. The estimation reveals the government's strong systematic use of public spending in infrastructure and current transfers as a means to earn votes. Most importantly, we show that the magnitude of the election cycle has been exacerbated during the country's most democratic episodes. Copyright 2002 by Blackwell Publishing Ltd

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  • Gonzalez, Maria de los Angeles, 2002. "Do Changes in Democracy Affect the Political Budget Cycle? Evidence from Mexico," Review of Development Economics, Wiley Blackwell, vol. 6(2), pages 204-224, June.
  • Handle: RePEc:bla:rdevec:v:6:y:2002:i:2:p:204-24
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    Cited by:

    1. Marco Bonomo & Cristina Terra, 2008. "Political Business Cycles through Lobbying," THEMA Working Papers 2008-18, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    2. Drazen, Allan & Eslava, Marcela, 2010. "Electoral manipulation via voter-friendly spending: Theory and evidence," Journal of Development Economics, Elsevier, pages 39-52.
    3. Ricardo N. Bebczuk & Ugo Panizza & Arturo Galindo, 2006. "An Evaluation of the Contractionary Devaluation Hypothesis," IDB Publications (Working Papers) 1583, Inter-American Development Bank.
    4. Rodriguez-Oreggia, Eduardo & Rodriguez-Pose, Andres, 2004. "The Regional Returns of Public Investment Policies in Mexico," World Development, Elsevier, vol. 32(9), pages 1545-1562, September.
    5. Leonardo Martinez, 2008. "A theory of political cycles," Working Paper 05-04, Federal Reserve Bank of Richmond.
    6. Marcela Eslava, 2006. "The Political Economy of Fiscal Policy: Survey," Research Department Publications 4487, Inter-American Development Bank, Research Department.
    7. Georgios Efthyvoulou, 2012. "Political budget cycles in the European Union and the impact of political pressures," Public Choice, Springer, vol. 153(3), pages 295-327, December.
    8. Cousins, Mel, 2007. "Political budget cycles and social security budget increases in the Republic of Ireland, 1923-2005," MPRA Paper 5359, University Library of Munich, Germany.
    9. Santolini, Raffaella, 2011. "Do electoral rules and elections matter in expenditure fragmentation? Empirical evidence from Italian regions," MPRA Paper 29724, University Library of Munich, Germany.
    10. Margarita Katsimi & Vassilis Sarantides, 2012. "Do elections affect the composition of fiscal policy in developed, established democracies?," Public Choice, Springer, vol. 151(1), pages 325-362, April.
    11. Toke Aidt & Graham Mooney, 2014. "Voter suffrage and the political budget cycle: evidence from the London Metropolitan Boroughs 1902-1937," Cambridge Working Papers in Economics 1401, Faculty of Economics, University of Cambridge.
    12. Ebrima A Faal, 2007. "Political Budget Cycles in Papua New Guinea," IMF Working Papers 07/219, International Monetary Fund.
    13. Roberto Pasten & James P. Cover, 2010. "The Political Economy of Unsustainable Fiscal Deficits," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., pages 169-189.
    14. Martinez, Leonardo, 2009. "A theory of political cycles," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1166-1186, May.
    15. Block, Steven A., 2003. "Political conditions and currency crises in emerging markets," Emerging Markets Review, Elsevier, vol. 4(3), pages 287-309, September.
    16. Allan Drazen & Marcela Eslava, 2005. "Electoral Manipulation via Expenditure Composition: Theory and Evidence," NBER Working Papers 11085, National Bureau of Economic Research, Inc.
    17. Sergio Sakurai & Naercio Menezes-Filho, 2011. "Opportunistic and partisan election cycles in Brazil: new evidence at the municipal level," Public Choice, Springer, vol. 148(1), pages 233-247, July.

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