 National elections and sub-national electoral cycles: Do strong fiscal rules matter in Europe?Antonia Lopez Villavicencio and Hugo Oriola No 2025-15, EconomiX Working Papers from University of Paris Nanterre, EconomiX Abstract: This paper investigates Political Business Cycles during national elections across European Union countries and their subnational regions from 1995 to 2022, with a focus on the role of national and supranational fiscal rules. We find robust evidence that national elections are associated with increased regional public spending and reduced income and wealth tax rates. While strong fiscal rules tend to constrain or have limited effect on spending-related PBCs, they simultaneously incentivize tax-based fiscal manipulation, indicating a shift in electoral strategies from expenditure to taxation. This pattern holds across most European countries at both national and regional levels, with variations depending on specific electoral and political systems. We also show that right-wing incumbents engage in both public spending and tax-based opportunistic PBCs, while left-wing incumbents primarily focus on tax-based manipulations. Furthermore, newly elected left-wing incumbents pursue fiscal conservatism, whereas right-wing incumbents typically maintain the fiscal status quo. Keywords: Elections; Fiscal rules; Political business cycle; National and regional politics; European Union. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2025-15 Access Statistics for this paper More papers in EconomiX Working Papers from University of Paris Nanterre, EconomiX Contact information at EDIRC. |
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