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The Political Economy of Local Governments' Expenditures

Although the literature on the political economy of public finance is already quite extensive, most articles analyse the behaviour of central governments. Furthermore, studies about the Portuguese economy are scarce. The present article contributes for a better understanding of these phenomena by testing the influence of political factors on municipal expenditure decisions in Portugal. The dataset used in the empirical work has information for all mainland Portuguese municipalities from 1979 to 2000. The tests performed reveal that local politicians increase capital expenditures before elections, particularly on roads and streets construction. Results also indicate that when the mayor belongs to the party that dominates the municipal assembly capital expenditures are higher. Finally, no support was found for partisan effects on incumbents’ investment expenditures choices.

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Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 8/2002.

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Date of creation: 2002
Date of revision:
Handle: RePEc:nip:nipewp:8/2002
Contact details of provider: Postal: Núcleo de Investigação em Políticas Económicas, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal
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  1. Bohn, Henning & Inman, Robert P., 1996. "Balanced-budget rules and public deficits: evidence from the U.S. states," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 13-76, December.
  2. Kenneth Rogoff, 1987. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
  3. Alberto Alesina & Roberto Perotti, 1996. "Budget Deficits and Budget Institutions," IMF Working Papers 96/52, International Monetary Fund.
  4. Tabellini, Guido & Alesina, Alberto, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Scholarly Articles 3612769, Harvard University Department of Economics.
  5. Seitz, Helmut, 2000. " Fiscal Policy, Deficits and Politics of Subnational Governments: The Case of the German Laender," Public Choice, Springer, vol. 102(3-4), pages 183-218, March.
  6. Rogoff, Kenneth & Sibert, Anne, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 1-16, January.
  7. repec:tpr:qjecon:v:113:y:1998:i:3:p:949-963 is not listed on IDEAS
  8. Alberto Alesina & Tamim Bayoumi, 1996. "The Costs and Benefits of Fiscal Rules: Evidence from U.S. States," NBER Working Papers 5614, National Bureau of Economic Research, Inc.
  9. repec:tpr:qjecon:v:102:y:1987:i:3:p:651-78 is not listed on IDEAS
  10. Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-party System as a Repeated Game," Scholarly Articles 4552531, Harvard University Department of Economics.
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