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Political Budget Cycles in New versus Established Democracies

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  • Adi Brender
  • Allan Drazen

Abstract

Like other recent studies, we find the existence of a political deficit cycle in a large cross-section of countries. However, we find that this result is driven by the experience of new democracies'. The strong budget cycle in those countries accounts for the finding of a budget cycle in larger samples that include these countries; when these countries are removed from the larger sample, so that only established' democracies remain, the political budget cycle disappears. The political deficit cycle in new democracies accounts for findings in both developed and less developed economies, for the finding that the cycle is stronger in weaker democracies, and for differences in the political cycle across governmental and electoral systems. 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

  • Adi Brender & Allan Drazen, 2004. "Political Budget Cycles in New versus Established Democracies," NBER Working Papers 10539, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:10539
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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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