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Political Business Cycle in Czech Municipalities

Author

Listed:
  • Lucie Sedmihradská
  • Rudolf Kubík
  • Jakub Haas

Abstract

The paper examines the political business cycle at the municipal level in the Czech Republic using data for 205 municipalities in the period 2001-2007. We introduce empirical models based on fixed-effects panel data regression testing the capital and current expenditure manipulation prior to elections. The results indicate significant increase in capital expenditures and significant decrease in current expenditures prior to elections. At the same time the manipulation with capital expenditures does not increase the probability of re-election for the incumbents in the Czech municipalities.

Suggested Citation

  • Lucie Sedmihradská & Rudolf Kubík & Jakub Haas, 2011. "Political Business Cycle in Czech Municipalities," Prague Economic Papers, University of Economics, Prague, vol. 2011(1), pages 59-70.
  • Handle: RePEc:prg:jnlpep:v:2011:y:2011:i:1:id:387:p:59-70
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    References listed on IDEAS

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    1. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2004. "Opportunistic Political Cycles: Test in a Young Democracy Setting," The Quarterly Journal of Economics, Oxford University Press, vol. 119(4), pages 1301-1338.
    2. Veiga, Linda G. & Veiga, Francisco Jose, 2007. "Does opportunism pay off?," Economics Letters, Elsevier, vol. 96(2), pages 177-182, August.
    3. Rodrigo Cerda & Rodrigo Vergara, 2007. "Business cycle and political election outcomes: Evidence from the Chilean democracy," Public Choice, Springer, vol. 132(1), pages 125-136, July.
    4. William D. Nordhaus, 1989. "Alternative Approaches to the Political Business Cycle," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(2), pages 1-68.
    5. Rosenberg, Jacob, 1992. "Rationality and the Political Business Cycle: The Case of Local Government," Public Choice, Springer, vol. 73(1), pages 71-81, January.
    6. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
    7. Sergio Sakurai & Naercio Menezes-Filho, 2008. "Fiscal policy and reelection in Brazilian municipalities," Public Choice, Springer, vol. 137(1), pages 301-314, October.
    8. Linda Veiga & Francisco Veiga, 2007. "Political business cycles at the municipal level," Public Choice, Springer, vol. 131(1), pages 45-64, April.
    9. Drazen, Allan & Eslava, Marcela, 2010. "Electoral manipulation via voter-friendly spending: Theory and evidence," Journal of Development Economics, Elsevier, vol. 92(1), pages 39-52, May.
    10. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
    11. Arellano, Manuel, 2003. "Panel Data Econometrics," OUP Catalogue, Oxford University Press, number 9780199245291.
    12. Philip Hemmings, 2006. "Improving Public-spending Efficiency in Czech Regions and Municipalities," OECD Economics Department Working Papers 499, OECD Publishing.
    13. Sakurai, Sergio N. & Menezes, Naercio A., 2008. "Fiscal policy and reelection in Brazilian municipalities," Insper Working Papers wpe_117, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    14. William D. Nordhaus, 1975. "The Political Business Cycle," Review of Economic Studies, Oxford University Press, vol. 42(2), pages 169-190.
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    Citations

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    Cited by:

    1. Michal Plaček & Milan Půček & František Ochrana & Milan Křápek & Lenka Matějová, 2016. "Political Business Cycle in the Czech Republic: Case of Municipalities," Prague Economic Papers, University of Economics, Prague, vol. 2016(3), pages 304-320.
    2. Lenka Stastna, 2015. "Electoral Cycles in Public Expenditures: Evidence from Czech Local Governments," Working Papers IES 2015/28, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Dec 2015.
    3. repec:eee:spacre:v:16:y:2013:i:1:p:74-80 is not listed on IDEAS
    4. Balaguer-Coll, Maria Teresa & Brun-Martos, María Isabel & Forte, Anabel & Tortosa-Ausina, Emili, 2015. "Local governments' re-election and its determinants: New evidence based on a Bayesian approach," European Journal of Political Economy, Elsevier, vol. 39(C), pages 94-108.

    More about this item

    Keywords

    local government; political business cycle; elections; Czech municipalities; panel data regressions;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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