Expenditure visibility and voter memory: a compositional approach to the political budget cycle in Indian states, 1959–2012

J. Stephen Ferris and Bharatee Dash

Economics of Governance, 2019, vol. 20, issue 2, No 2, 129-157

Abstract: Abstract In this paper we argue that the political budget cycle test for opportunistic spending is weakened by the absence of a strong reason for why spending increases should be restricted to the time period leading into the next election. One would expect that a targeted benefit should elicit the same degree of voter support whenever it is received. Here we argue that while the political need to fulfill a list of pre-election promises serves to constrain excessive spending, the characteristic that some expenditure items better demonstrate the contributions of the current government to voters (with depreciating memories) leads to a predictable reallocation of the composition of budgetary spending across the life of a government. Our test for a predictable timing pattern to subcomponents of the budget uses capital expenditures as the budgetary item with greater visibility spillovers and a data set of 14 Indian states over 54 years (1959/60–2012/13). The predictions that capital expenditures relative to both total government expenditure and government consumption should rise across the governing interval are found to be consistent with the data and provide a better fit with the data than more traditional political budget cycle models that use aggregate spending/deficits in the pre-election period.

Keywords: Political business or budget cycle; The time varying composition of Indian state government spending; Visibility of capital expenditures; Panel data; ARDL modeling (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (8)

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Working Paper: Expenditure Visibility and Voter Memory: A Compositional Approach to the Political Budget Cycle in Indian States, 1959 – 2012 (2016)
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DOI: 10.1007/s10101-018-0216-1

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