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Political Business Cycle in Czech Municipalities

Author

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  • 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, Prague University of Economics and Business, vol. 2011(1), pages 59-70.
    • Handle: RePEc:prg:jnlpep:v:2011:y:2011:i:1:id:387:p:59-70
    DOI: 10.18267/j.pep.387
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    1. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2004. "Opportunistic Political Cycles: Test in a Young Democracy Setting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(4), pages 1301-1338.
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    4. Sergio Sakurai & Naercio Menezes-Filho, 2008. "Fiscal policy and reelection in Brazilian municipalities," Public Choice, Springer, vol. 137(1), pages 301-314, October.
    5. 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.
    6. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
    7. 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.
    8. William D. Nordhaus, 1975. "The Political Business Cycle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(2), pages 169-190.
    9. 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.
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    13. Arellano, Manuel, 2003. "Panel Data Econometrics," OUP Catalogue, Oxford University Press, number 9780199245291.
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    Cited by:

    1. Silva-Escobar, Daniel, 2022. "Conducta electoral oportunista y determinantes económicos de la reelección de alcaldes/as en Chile," Documentos de Trabajo 10, Estudios Nueva Economía.
    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. 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.
    4. Michal Plaček & Milan Půček & František Ochrana & Milan Křápek & Lenka Matějová, 2016. "Political Business Cycle in the Czech Republic: Case of Municipalities," Prague Economic Papers, Prague University of Economics and Business, vol. 2016(3), pages 304-320.
    5. Petra Drzková, 2013. "Reflection of the Election Cycle in Public Procurement in Prague [Zachycení volebního cyklu v zadávání veřejných zakázek v hlavním městě Praze]," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2013(4), pages 49-68.
    6. Balaguer-Coll, María Teresa & Brun-Martos, María Isabel, 2013. "El efecto del gasto público sobre las posibilidades de reelección de los gobiernos locales," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 16(1), pages 74-80.

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    More about this item

    Keywords

    local government; political business cycle; elections; Czech municipalities; panel data regressions;
    All these keywords.

    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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