Political Budget Cycles: Conditioning Factors and New Evidence

This chapter reviews the literature on political budget cycles (PBCs), focusing on studies that analyze the conditionality of opportunistic effects. First, factors that affect incentives of politicians to embark on pre-electoral policy manipulations are highlighted, and then factors that influence the capability of those manipulations to generate additional votes are discussed. Finally, the effects of personal characteristics of leaders on PBCs are explored. To complement the review, an empirical investigation of electoral effects on central governments’ deficit, expenditure and revenue series, under various political arrangements, is implemented on a large panel covering 78 countries and 42 years of data (1975 to 2016). Empirical results confirm that PBCs are more likely to occur under certain politico-institutional circumstances, including predetermined elections, disputed elections, majoritarian electoral rules, larger private benefits from holding office, weak constraints on executives, a high proportion of uninformed voters, and new democracies.