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The political process and the use of debt financing by state governments

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  • William Baber
  • Pradyot Sen

Abstract

Empirical evidence offered in this study suggests that decisions by state government officials to effect debt-financed spending depend in part on the state's gubernatorial election cycle. More specifically, the results reveal relative increases in state debt issues in anticipation of elections, and furthermore, they reveal that such increases are more significant for states characterized by high interparty political competition. While theoretical limitations preclude a definitive explanation for these results, the evidence is consistent with a view of state political markets where incumbent parties manipulate public policy so as to enhance the probability of success in pending elections. This insight is significant in that it suggests a relationship between public policy decisions and election cycles in a context heretofore unexplored. Copyright Martinus Nijhoff Publishers 1986

Suggested Citation

  • William Baber & Pradyot Sen, 1986. "The political process and the use of debt financing by state governments," Public Choice, Springer, vol. 48(3), pages 201-215, January.
  • Handle: RePEc:kap:pubcho:v:48:y:1986:i:3:p:201-215
    DOI: 10.1007/BF00051618
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    File URL: http://hdl.handle.net/10.1007/BF00051618
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    References listed on IDEAS

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    1. Wagner, Richard E, 1977. "Economic Manipulation for Political Profit: Macroeconomic Consequences and Constitutional Implications," Kyklos, Wiley Blackwell, vol. 30(3), pages 395-410.
    2. repec:cup:apsrev:v:63:y:1969:i:03:p:867-879_25 is not listed on IDEAS
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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. Fox, William F. & Gurley, Tami, 2006. "Will consolidation improve sub-national governments ?," Policy Research Working Paper Series 3913, The World Bank.
    3. Zhao, Bo & Wang, Wen, 2017. "Transparency in state debt disclosure," Working Papers 17-10, Federal Reserve Bank of Boston.
    4. Beatriz Cuadrado-Ballesteros & Noemí Mordán & Isabel-María García-Sánchez, 2014. "Is Local Financial Health Associated with Citizens’ Quality of Life?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 119(2), pages 559-580, November.
    5. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291401, HAL.
    6. repec:hal:journl:hal-01291401 is not listed on IDEAS

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