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Procyclical government spending: a public choice analysis

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  • Andrew Abbott

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  • Philip Jones

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Abstract

Procyclical government spending occurs when government expenditures increase at a faster rate than income in an economic upturn but fall at a faster rate in a recession. Voracity effects occur when competition for increased spending proves more effective as national income increases. Public choice theory can be applied to describe the distribution of fiscal power across different tiers of government to shed insight into competition for intergovernmental transfers. Politicians have electoral incentives to press for intergovernmental transfers but they also have electoral incentives to signal their ability to manage the economy. With this mix of incentives, the prediction is that intergovernmental transfers will be procyclical and that sub-central government spending will be more procyclical than central government spending. Public choice analysis of pressure for increased public spending predicts a specific pattern of cyclical government spending. This pattern can be observed when analyzing government expenditures in 20 OECD countries between 1995 and 2006. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • Andrew Abbott & Philip Jones, 2013. "Procyclical government spending: a public choice analysis," Public Choice, Springer, vol. 154(3), pages 243-258, March.
  • Handle: RePEc:kap:pubcho:v:154:y:2013:i:3:p:243-258
    DOI: 10.1007/s11127-011-9816-9
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    File URL: http://hdl.handle.net/10.1007/s11127-011-9816-9
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Abbott, Andrew & Cabral, René & Jones, Philip & Palacios, Roberto, 2015. "Political pressure and procyclical expenditure: An analysis of the expenditures of state governments in Mexico," European Journal of Political Economy, Elsevier, vol. 37(C), pages 195-206.
    2. Meloni, Osvaldo, 2016. "Turning a blind eye to policy prescriptions. Exploring the sources of procyclical fiscal behavior at subnational level," MPRA Paper 70541, University Library of Munich, Germany.
    3. Konstantinos Konstantakis & Theofanis Papageorgiou & Panayotis Michaelides & Efthymios Tsionas, 2015. "Economic Fluctuations and Fiscal Policy in Europe: A Political Business Cycles Approach Using Panel Data and Clustering (1996–2013)," Open Economies Review, Springer, vol. 26(5), pages 971-998, November.
    4. repec:eee:retrec:v:63:y:2017:i:c:p:13-26 is not listed on IDEAS
    5. Andrew Abbott & Philip Jones, 2016. "Fiscal Illusion and Cyclical Government Expenditure: State Government Expenditure in the United States," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(2), pages 177-193, May.
    6. repec:kap:itaxpf:v:25:y:2018:i:4:d:10.1007_s10797-017-9478-8 is not listed on IDEAS
    7. Andrew Abbott & Philip Jones, 2014. "Pressures to Increase Public Expenditure and Patterns of Procyclical Expenditure," Economic Issues Journal Articles, Economic Issues, vol. 19(2), pages 39-54, September.

    More about this item

    Keywords

    Business cycles; Fiscal policy; Voracity effects; Volatility; E62; H50; H60; H70;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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