Political cycles in income from privatization: The case of Albania

Drini Imami, Endrit Lami and Holger Kächelein

No 77, BERG Working Paper Series from Bamberg University, Bamberg Economic Research Group

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.

Keywords: Albania; Political Business Cycle; Privatization (search for similar items in EconPapers)
JEL-codes: E32 H61 O23 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-mac and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bamber:77

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