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Where Does the Political Budget Cycle Really Come From?

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  • Brender, Adi
  • Drazen, Allan

Abstract

Whereas a political budget cycle was once thought to be a phenomenon of less-developed economies, some recent studies find such a cycle in a large cross-section of both developed and developing countries. We find that this result is driven by the experience of ‘new democracies’, where fiscal manipulation may be effective because of lack of experience with electoral politics or lack of information that voters in more established democracies use. The strong budget cycle in those countries accounts for the finding of a budget cycle in larger samples that include these countries. Once these countries are removed from the larger sample, the political budget cycle disappears. Our findings may reconcile two contradictory views of pre-electoral manipulation, one arguing it is a useful instrument to gain voter support and a widespread empirical phenomenon, the other arguing that voters punish rather than reward fiscal manipulation.

Suggested Citation

  • Brender, Adi & Drazen, Allan, 2003. "Where Does the Political Budget Cycle Really Come From?," CEPR Discussion Papers 4049, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4049
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. JEdgar Alfredo Nande Vazque & Juan Carlos Martínez, 2016. "Political Budget Cycle: Mexican Town Halls Case," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 6(8), pages 31-42, August.
    2. repec:beo:journl:v:62:y:2017:i:214:p:7-44 is not listed on IDEAS
    3. Marcela Eslava, 2005. "Political Budget Cycles Or Voters As Fiscal Conservatives? Evidence From Colombia," DOCUMENTOS CEDE 003343, UNIVERSIDAD DE LOS ANDES-CEDE.
    4. Jorge M. Streb & Daniel Lema & Gustavo Torrens, 2009. "Checks and Balances on Political Budget Cycles: Cross-Country Evidence," Kyklos, Wiley Blackwell, vol. 62(3), pages 426-447, August.
    5. Álvaro Díaz, Henry Laverde, John Jairo Gómez, 2011. "Política tributaria y sus efectos sobre la distribución del ingreso en Colombia durante el siglo XX," REVISTA CIFE, UNIVERSIDAD SANTO TOMÁS, December.
    6. Kotosz, Balázs, 2006. "Megszorítások és lazítások - a rendszerváltás fiskális politikájának szerkezetéről
      [Tightening and loosening - on the structure of the fiscal policy of systemic change]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 158-174.
    7. Ernesto H. Stein & Jorge M. Streb & Piero Ghezzi, 2005. "Real Exchange Rate Cycles Around Elections," Economics and Politics, Wiley Blackwell, vol. 17(3), pages 297-330, November.
    8. Sergio Sakurai & Naercio Menezes-Filho, 2008. "Fiscal policy and reelection in Brazilian municipalities," Public Choice, Springer, vol. 137(1), pages 301-314, October.
    9. Abel L. Costa Fernandes & Paulo R. Mota, 2013. "The Euro Zone Peripheral Countries’ Sovereign Debt Crisis: Also a Case of Non-Mature Democracies?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(3), pages 291-310, May.
    10. Alejandro Saporiti & Jorge Streb, 2008. "Separation of powers and political budget cycles," Public Choice, Springer, vol. 137(1), pages 329-345, October.
    11. Miomir Jakšić & Aleksandra Praščević, 2011. "The New Political Macroeconomics in Modern Macroeconomics and Its Appliance to Transition Processes in Serbia," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(4), pages 545-557, December.

    More about this item

    Keywords

    fiscal manipulation; new democracy; political budget cycle;

    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
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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