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Public Investment and Re-election Prospects in Developed Countries

  • Margarita Katsimi

    ()

    (Athens University of Economics and Business and CESifo)

  • Vassilis Sarantides

    ()

    (Department of Economics, The University of Sheffield)

A growing body of literature suggests that office-motivated politicians manipulate fiscal policy instruments in order to seek their re-election. This paper directly examines the impact of the electoral manipulation of the level and composition of fiscal policy on incumbents’ re-election prospects. This impact is estimated through a panel of 21 OECD countries over the period of 1972-1999. Our results suggest that increased public investment during the term in office as well as a shift in expenditures toward public investment can improve re-election prospects. To the contrary, results seem to verify the assumption of low visibility of capital spending, since election year manipulation via public investment does not affect re-election prospects. We also find that voters disfavour politicians who create deficits during elections, while deficit creation over the term in office and preceding the election year (when it is financed by equal proportions of public investment and consumption expenditures) does not seem to affect re-election prospects.

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File URL: http://www.shef.ac.uk/economics/research/serps/articles/2013_004.html
File Function: First version, 2013
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Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2013004.

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Length: 26 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:shf:wpaper:2013004
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