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Political cycles in income from privatization: The case of Albania

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  • Imami, Drini
  • Lami, Endrit
  • Kächelein, Holger

Abstract

The phenomenon of manipulation of the economy by the incumbent for electoral purpose is called Political Business Cycles (PBC). Using policy control economic instruments, such as fiscal and monetary instruments, governments may manipulate the economy to gain electoral advantage by producing growth and decreasing unemployment before elections. Earlier research on PBC in Albania found clear evidence of fiscal expansion before elections. In addition to increased income from taxes and borrowing, another source of financing the increased fiscal expansion in transition countries may be income from privatization, which is also the object of the analysis of this paper. In our analysis we apply standard econometric approach, used widely for research related to PBC. We test if income from privatization increases before elections. We find statistically significant increase of income from privatization before general (parliamentary) elections, which may lead us to conclude that one of the reasons may be to finance increased expenditures before elections. Another motivation, behind this behavior of the incumbent, may be rent - seeking. These results are of particular interest, as it is for the first time that income from privatization is analyzed in conjunction with PBC.

Suggested Citation

  • Imami, Drini & Lami, Endrit & Kächelein, Holger, 2011. "Political cycles in income from privatization: The case of Albania," BERG Working Paper Series 77, Bamberg University, Bamberg Economic Research Group.
  • Handle: RePEc:zbw:bamber:77
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    More about this item

    Keywords

    Albania; Political Business Cycle; Privatization;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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