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Tariff increases over the electoral cycle: A question of size and salience

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  • Klien, Michael

Abstract

Research on the political budget cycle suggests that some budget items are more visible than others. Accordingly, the cycle will exert a varying impact on policy instruments of different salience. Using a panel data set of tariff decisions by Austrian local governments we identify a stable and sizable electoral cycle in water tariffs. Tariff increases are both less frequent and less strong before elections. The cycle effect is, however, not constant: Small increases are not affected by elections or even more likely. This is consistent with advances from prospect theory suggesting that visibility may depend on the size of a policy. Consequently, small tariff changes may not be salient, particularly if they are below inflation as a reference threshold.

Suggested Citation

  • Klien, Michael, 2014. "Tariff increases over the electoral cycle: A question of size and salience," European Journal of Political Economy, Elsevier, vol. 36(C), pages 228-242.
  • Handle: RePEc:eee:poleco:v:36:y:2014:i:c:p:228-242
    DOI: 10.1016/j.ejpoleco.2014.08.004
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    Cited by:

    1. Eric Dubois, 2016. "Political business cycles 40 years after Nordhaus," Public Choice, Springer, vol. 166(1), pages 235-259, January.
    2. repec:eee:poleco:v:49:y:2017:i:c:p:146-163 is not listed on IDEAS
    3. Bordignon, Massimo & Grembi, Veronica & Piazza, Santino, 2017. "Who do you blame in local finance? An analysis of municipal financing in Italy," European Journal of Political Economy, Elsevier, vol. 49(C), pages 146-163.
    4. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291401, HAL.
    5. repec:hal:journl:hal-01291401 is not listed on IDEAS

    More about this item

    Keywords

    Tax salience; Electoral cycle; Tariffs;

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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