Presidential Election, Checks and Balances, and Allocation of Public Expenditures in Taiwan

Few studies on political budget cycles have directly tested the public budget against changes in the composition of public spending. Meanwhile, previous studies implicitly assume that the executive has full discretionary power over fiscal policy, neglecting the role of the legislature in providing checks and balances. This study goes beyond traditional political budget cycle models and sheds light on a case study for Taiwan over the 1967-2008 period. Our empirical results show that social welfare expenditure is a favored strategy often employed by Taiwan's government in order to enhance the prospects of re-election. However, we find no evidence that election year spending shifts away from capital expenditures towards more visible current expenditures. The results also show that the effective checks and balances of the legislature have no significant influence over Taiwan's political budget cycles. Our conjecture is that Taiwan either as no legislative veto player or there is low compliance with the law during our study period.