Political budget cycles and election outcomes

In: Klomp , J & de Haan , J 2013 , ' Political budget cycles and election outcomes ' , Public Choice , vol. 157 , no. 1-2 , pp. 245-267 . https://doi.org/10.1007/s11127-012-9943-y ; ISSN:0048-5829

Abstract

This paper addresses two empirical questions. Is fiscal policy affected by upcoming elections? If so, do election-motivated fiscal policies enhance the probability of re-election of the incumbent? Employing data for 65 democratic countries over 1975-2005 in a semi-pooled panel model, we find that in most countries fiscal policy is hardly affected by elections. The countries for which we find a significant political budget cycle are very diverse. They include 'young' democracies but also 'established' democracies. In countries with a political budget cycle, election-motivated fiscal policies have a significant positive (but fairly small) effect on the electoral support for the political parties in government.