Human Capital and Political Business Cycles

Akhmedov Akhmed ()

EERC Working Paper Series from EERC Research Network, Russia and CIS

Abstract: Classical theory considers political business cycle as a result of either opportunistic behavior of government (opportunistic cycle) or aiming policy on certain constituency (partisan cycle). In this paper, we propose an alternative explanation of the phenomenon of political business cycle — experience of government. We propose an illustration that shows that elections infer cycles without any opportunism or ideology of incumbents. We also build a model with endogenous ego-rent. The model explains a channel to increase incentives, when none has commitment — governors need to develop skills to increase their value for public and increase probability to get re-elected. Using fiscal monthly data of Russian regions from 1996 to 2004, we got evidence both of positive effect of experience on performance and opportunistic component of the cycle. We also got evidence of diminishing return on experience.

Keywords: Russia; elections; opportunistic business cycle; experience; sunk cost; Russian regions (search for similar items in EconPapers)
JEL-codes: D72 E32 H72 P16 (search for similar items in EconPapers)
Date: 2006-04-26
New Economics Papers: this item is included in nep-hrm, nep-mac, nep-pbe, nep-pol and nep-tra
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