IDEAS home Printed from https://ideas.repec.org/a/eee/eecrev/v72y2014icp1-18.html
   My bibliography  Save this article

Younger parties, bigger spenders? Party age and political budget cycles

Author

Listed:
  • Hanusch, Marek
  • Keefer, Philip

Abstract

We identify a new explanation for political budget cycles (PBCs): politicians have stronger incentives to increase spending around elections in the presence of younger political parties. Previous research suggests that PBCs should be larger when voters are uninformed about politician characteristics and politicians are less credible. Research on political parties suggests that older parties are more likely to attenuate problems of both information and credible commitment. The effects of party age are robust to controls for numerous other political characteristics of countries. In particular, the arguments and evidence here illuminate a mechanism underlying recent robust findings that PBCs are larger in younger democracies: party age fully accounts for these effects.

Suggested Citation

  • Hanusch, Marek & Keefer, Philip, 2014. "Younger parties, bigger spenders? Party age and political budget cycles," European Economic Review, Elsevier, vol. 72(C), pages 1-18.
  • Handle: RePEc:eee:eecrev:v:72:y:2014:i:c:p:1-18
    DOI: 10.1016/j.euroecorev.2014.08.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0014292114001226
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Adi Brender & Allan Drazen, 2005. "Political Budget Cycles in New versus Established Democracies," Bank of Israel Working Papers 2005.04, Bank of Israel.
    2. Alejandro Saporiti & Jorge Streb, 2008. "Separation of powers and political budget cycles," Public Choice, Springer, vol. 137(1), pages 329-345, October.
    3. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    4. 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.
    5. Gene M. Grossman & Elhanan Helpman, 2005. "A Protectionist Bias in Majoritarian Politics," The Quarterly Journal of Economics, Oxford University Press, vol. 120(4), pages 1239-1282.
    6. Adi Brender & Allan Drazen, 2007. "Why is Economic Policy Different in New Democracies? Affecting Attitudes About Democracy," NBER Working Papers 13457, National Bureau of Economic Research, Inc.
    7. Min Shi & Jakob Svensson, 2003. "Political Budget Cycles: A Review of Recent Developments," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 29, pages 67-76.
    8. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    9. Keefer, Philip, 2011. "Collective Action, Political Parties, and Pro-Development Public Policy," Asian Development Review, Asian Development Bank, vol. 28(1), pages 94-118.
    10. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    11. Adi Brender & Allan Drazen, 2008. "How Do Budget Deficits and Economic Growth Affect Reelection Prospects? Evidence from a Large Panel of Countries," American Economic Review, American Economic Association, vol. 98(5), pages 2203-2220, December.
    12. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1989. "The Revenues-Expenditures Nexus: Evidence from Local Government Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 415-429, May.
    13. Enikolopov, Ruben & Zhuravskaya, Ekaterina, 2007. "Decentralization and political institutions," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2261-2290, December.
    14. 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.
    15. Brender, Adi, 2003. "The effect of fiscal performance on local government election results in Israel: 1989-1998," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2187-2205, September.
    16. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2004. "Opportunistic Political Cycles: Test in a Young Democracy Setting," The Quarterly Journal of Economics, Oxford University Press, vol. 119(4), pages 1301-1338.
    17. Alt, James E. & Lassen, David Dreyer, 2006. "Fiscal transparency, political parties, and debt in OECD countries," European Economic Review, Elsevier, vol. 50(6), pages 1403-1439, August.
    18. Galasso, Vincenzo & Nannicini, Tommaso, 2011. "Competing on Good Politicians," American Political Science Review, Cambridge University Press, vol. 105(1), pages 79-99, February.
    19. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    20. Toke Aidt & Francisco Veiga & Linda Veiga, 2011. "Election results and opportunistic policies: A new test of the rational political business cycle model," Public Choice, Springer, vol. 148(1), pages 21-44, July.
    21. 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.
    22. repec:cup:apsrev:v:102:y:2008:i:01:p:19-31_08 is not listed on IDEAS
    23. Gehlbach, Scott & Keefer, Philip, 2011. "Investment without democracy: Ruling-party institutionalization and credible commitment in autocracies," Journal of Comparative Economics, Elsevier, vol. 39(2), pages 123-139, June.
    24. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    25. Bowsher, Clive G., 2002. "On testing overidentifying restrictions in dynamic panel data models," Economics Letters, Elsevier, vol. 77(2), pages 211-220, October.
    26. Khemani, Stuti, 2004. "Political cycles in a developing economy: effect of elections in the Indian States," Journal of Development Economics, Elsevier, vol. 73(1), pages 125-154, February.
    27. Razvan Vlaicu, 2008. "Democracy, Credibility, and Clientelism," Journal of Law, Economics, and Organization, Oxford University Press, vol. 24(2), pages 371-406, October.
    28. Susanne Lohmann, 1998. "Rationalizing the Political Business Cycle: A Workhorse Model," Economics and Politics, Wiley Blackwell, vol. 10(1), pages 1-17, March.
    29. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Oxford University Press, vol. 55(1), pages 1-16.
    30. Marek Hanusch, 2012. "Coalition incentives for political budget cycles," Public Choice, Springer, vol. 151(1), pages 121-136, April.
    31. repec:wly:amposc:v:51:y:2007:i:4:p:804-821 is not listed on IDEAS
    32. 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.
    33. Block, Steven A., 2002. "Political business cycles, democratization, and economic reform: the case of Africa," Journal of Development Economics, Elsevier, vol. 67(1), pages 205-228, February.
    34. Scott Ashworth & Ethan Bueno de Mesquita, 2008. "Informative Party Labels With Institutional and Electoral Variation," Journal of Theoretical Politics, , vol. 20(3), pages 251-273, July.
    35. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
    36. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group.
    37. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    38. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
    39. Bernard Caillaud & Jean Tirole, 2002. "Parties as Political Intermediaries," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1453-1489.
    40. repec:wly:amposc:v:50:y:2006:i:3:p:530-550 is not listed on IDEAS
    41. Stephen Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    42. Marek Hanusch, 2012. "Mooted signals: economic disturbances and political budget cycles," Journal of Applied Economics, Universidad del CEMA, vol. 15, pages 189-212, November.
    43. Mark P. Jones & Osvaldo Meloni & Mariano Tommasi, 2012. "Voters as Fiscal Liberals: Incentives and Accountability in Federal Systems," Economics and Politics, Wiley Blackwell, vol. 24(2), pages 135-156, July.
    44. Marek Hanusch & Daniel Magleby, 2014. "Popularity, polarization, and political budget cycles," Public Choice, Springer, vol. 159(3), pages 457-467, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Annen, Kurt & Strickland, Scott, 2017. "Global samaritans? Donor election cycles and the allocation of humanitarian aid," European Economic Review, Elsevier, vol. 96(C), pages 38-47.
    2. repec:eee:ecosys:v:41:y:2017:i:1:p:68-85 is not listed on IDEAS
    3. Marek Hanusch & Philip Keefer & Razvan Vlaicu, 2016. "Vote Buying or Campaign Promises?: Electoral Strategies When Party Credibility is Limited," IDB Publications (Working Papers) 95120, Inter-American Development Bank.
    4. repec:eee:eecrev:v:111:y:2019:i:c:p:122-138 is not listed on IDEAS
    5. Antoine CAZALS & Pierre MANDON, 2016. "Political Budget Cycles: Manipulation from Leaders or Manipulation from Researchers? Evidence from a Meta-Regression Analysis," Working Papers 201609, CERDI.
    6. Ardanaz, Martín & Izquierdo, Alejandro, 2017. "Current Expenditure Upswings in Good Times and Capital Expenditure Downswings in Bad Times?: New Evidence from Developing Countries," IDB Publications (Working Papers) 8558, Inter-American Development Bank.
    7. Hanusch, Marek & Keefer, Philip & Vlaicu, Razvan, 2016. "Vote Buying or Campaign Promises?: Electoral Strategies When Party Credibility is Limited," IDB Publications (Working Papers) 7775, Inter-American Development Bank.
    8. Pantelis Kammas & Vassilis Sarantides, 2016. "Fiscal redistribution around elections when democracy is not “the only game in town”," Public Choice, Springer, vol. 168(3), pages 279-311, September.
    9. repec:eee:jcecon:v:46:y:2018:i:4:p:1046-1061 is not listed on IDEAS
    10. Keefer, Philip & Milanovic, Branko, 2014. "Party age and party color : new results on the political economy of redistribution and inequality," Policy Research Working Paper Series 7129, The World Bank.
    11. repec:eee:jcecon:v:45:y:2017:i:4:p:773-792 is not listed on IDEAS
    12. Linda G. Veiga & Georgios Efthyvoulou & Atsuyoshi Morozumi, 2018. "Political Budget Cycles: Conditioning Factors and New Evidence," NIPE Working Papers 21/2018, NIPE - Universidade do Minho.
    13. Antoine Cazals & Pierre Mandon, 2015. "Political Budget Cycles: Manipulation of Leaders or Bias from Research? A Meta-Regression Analysis," Working Papers halshs-01238883, HAL.
    14. Mogues, Tewodaj & Billings, Lucy, 2015. "The making of public investments: Champions, coordination, and characteristics of nutrition interventions:," IFPRI discussion papers 1479, International Food Policy Research Institute (IFPRI).
    15. Antoine Cazals & Pierre Mandon, 2016. "Political Budget Cycles: Manipulation from Leaders or Manipulation from Researchers? Evidence from a Meta-Regression Analysis," Working Papers halshs-01320586, HAL.
    16. Bartolini, David & Santolini, Raffaella, 2017. "Political institutions behind good governance," Economic Systems, Elsevier, vol. 41(1), pages 68-85.
    17. repec:eee:poleco:v:52:y:2018:i:c:p:75-84 is not listed on IDEAS

    More about this item

    Keywords

    Political budget cycles; Political parties;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:72:y:2014:i:c:p:1-18. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/eer .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.