Roads or Schools? Political Budget Cycles with different types of voters
Using a new Colombian data set (1830-2000), we analyze how changes in the electoral legislation with regard to the characteristics of voters (in terms of education and income levels) has affected fiscal policy in electoral times. In line with economic theory, we show that after the law was reformed in 1936 the composition of the expenditure shifted towards social spending (like education, health, and welfare benefits) but there was decreased spending on infrastructure and investment projects (like roads). Consistent with the literature, we also find: 1.The timing and the size of the political budget cycles changed after 1936 and 2.After 1936 there was a shift in the funding mechanisms from indirect tax revenues to more debt.
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