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Politically driven cycles in fiscal policy: In depth analysis of the functional components of government expenditures

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  • Castro, Vítor
  • Martins, Rodrigo

Abstract

This article analyses the incidence of politically driven cycles on the functional components and sub-components of government expenditures over a group of 18 European countries during the period 1990–2012. An LSDVC estimator is employed in the empirical analysis. The results provide evidence of political opportunism at aggregated and disaggregated levels of public expenditures. The expenditure components that have proved to be more related to that behaviour are public services, education, social protection and some sub-components of health expenditure, items that tend to generate outcomes that are more visible to voters. Some disaggregated evidence of partisan manipulation is also found.

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  • Castro, Vítor & Martins, Rodrigo, 2018. "Politically driven cycles in fiscal policy: In depth analysis of the functional components of government expenditures," European Journal of Political Economy, Elsevier, vol. 55(C), pages 44-64.
  • Handle: RePEc:eee:poleco:v:55:y:2018:i:c:p:44-64
    DOI: 10.1016/j.ejpoleco.2017.11.003
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    Cited by:

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    2. Niklas Potrafke, 2019. "Fiscal Performance of Minority Governments: New Empirical Evidence for OECD Countries," CESifo Working Paper Series 7733, CESifo.
    3. Lim, Jamus Jerome, 2020. "The political economy of fiscal procyclicality," European Journal of Political Economy, Elsevier, vol. 65(C).
    4. Potrafke, Niklas, 2020. "General or central government? Empirical evidence on political cycles in budget composition using new data for OECD countries," European Journal of Political Economy, Elsevier, vol. 63(C).
    5. Niklas Potrafke & Felix Roesel, 2020. "The urban–rural gap in healthcare infrastructure: does government ideology matter?," Regional Studies, Taylor & Francis Journals, vol. 54(3), pages 340-351, March.
    6. Alina Daniela Vodă & Gabriela Dobrotă & Loredana Andreea Cristea, 2020. "Procyclical, Countercyclical and Acyclical Fiscal Policies," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 1101-1108, December.
    7. Giesenow, Federico M. & de Wit, Juliette & de Haan, Jakob, 2020. "The political and institutional determinants of fiscal adjustments and expansions: Evidence for a large set of countries," European Journal of Political Economy, Elsevier, vol. 64(C).
    8. Björn Kauder & Manuela Krause & Niklas Potrafke, 2018. "Electoral cycles in MPs’ salaries: evidence from the German states," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(4), pages 981-1000, August.
    9. Ludger Schuknecht & Holger Zemanek, 0. "Public expenditures and the risk of social dominance," Public Choice, Springer, vol. 0, pages 1-26.
    10. Ludger Schuknecht & Holger Zemanek, 2021. "Public expenditures and the risk of social dominance," Public Choice, Springer, vol. 188(1), pages 95-120, July.
    11. Potrafke, Niklas, 2017. "Partisan politics: The empirical evidence from OECD panel studies," Journal of Comparative Economics, Elsevier, vol. 45(4), pages 712-750.
    12. Bellani, Luna & Scervini, Francesco, 2020. "Heterogeneity in preferences for redistribution and public spending: A cross-country analysis," European Journal of Political Economy, Elsevier, vol. 63(C).
    13. Vitor Castro, 2016. "On the behaviour of the functional components ofgovernment expenditures during fiscal consolidations," NIPE Working Papers 11/2016, NIPE - Universidade do Minho.
    14. Mesquita Gabriel, José & Pereira Santos, João & Tavares, José, 2020. "Leave them Kids Alone! National Exams as a Political Tool," CEPR Discussion Papers 14374, C.E.P.R. Discussion Papers.
    15. Jordi Sanjuán & Pau Rausell & Vicente Coll & Raül Abeledo, 2020. "Mayors, Using Cultural Expenditure in An Opportunistic Way Improves the Chances of Re-Election, but Do Not Do It: Revisiting Political Budget Cycles," Sustainability, MDPI, Open Access Journal, vol. 12(21), pages 1-15, October.

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    More about this item

    Keywords

    Government expenditures; Political cycles; Elections; Europe; Fiscal policy;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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