Toward a political budget cycle? Unveiling long-term latent paths in Greece

George Petrakos (), Konstantinos Rontos (), Luca Salvati (), Chara Vavoura () and Ioannis Vavouras ()
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George Petrakos: Panteion University of Social and Political Sciences
Konstantinos Rontos: University of the Aegean
Luca Salvati: University of Macerata
Chara Vavoura: University of Athens and Hellenic Open University
Ioannis Vavouras: Panteion University of Social and Political Sciences

Quality & Quantity: International Journal of Methodology, 2022, vol. 56, issue 5, No 22, 3379-3394

Abstract: Abstract Empirical studies demonstrated the existence of political budget cycles in many countries, although mechanisms underlying such cycles remain substantially unclear. The present work investigates this mechanism using data from the Greek economy encompassing four decades (1980–2018). Results of regression models indicate that opportunistic political and economic behaviors arise on the part of elected politicians in power via manipulation of public expenditure rather than through the handling of public revenue. In years of general or parliamentary elections, public expenditure rose by about 2.2% of the country’s gross domestic product. This increase is atypical for advanced economies with well-established democratic systems. A specific analysis delineating what specific categories of public spending are associated with political budget cycles, also demonstrated that they were created through final consumption expenditure and especially through collective consumption expenditure. Our findings are robust to various specifications of the econometric model, both linear and non-linear. We conclude that, in the case of Greece, future fiscal rules aimed at suppressing political budget cycles should control pre-election collective consumption expenditures instead of regulating direct and indirect taxes.

Keywords: Electoral budget cycles; General elections; Public revenue; Public expenditure; Collective consumption expenditure (search for similar items in EconPapers)
JEL-codes: D72 E62 H62 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11135-021-01260-1

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