Election-induced fiscal policy cycles in emerging market and developing economies

Jakob de Haan, Franziska Ohnsorge and Shu Yu

No 18708, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The widening of fiscal deficits during democratic elections is well established. We examine a broader set of fiscal outcomes around elections for a large set of emerging and developing economies (EMDEs), probe for differences between democracies and non-democracies, and estimate the degree to which fiscal deteriorations are unwound after elections. We show three patterns. First, primary deficits rise statistically significantly during elections, by 0.6 percentage point of GDP. Primary spending, especially on the government wage bill, also rises statistically significantly and indirect tax revenues fall. Second, these deteriorations occur in democracies and non-democracies alike. Third, the deterioration in primary deficits is not unwound after elections and the deterioration in primary spending is partially unwound after the election, mainly through cuts in capital spending. These patterns imply that deficits in EMDEs ratchet up over the course of several election cycles. Over time, this can threaten the sustainability of public finances. Finally, we find that better institutional quality (such as strong fiscal rules) and the presence of an IMF program partly mitigate the impact of elections on fiscal positions.

JEL-codes: D72 E62 H62 O10 (search for similar items in EconPapers)
Date: 2023-12
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP18708 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Election-Induced Fiscal Policy Cycles in Emerging Market and Developing Economies (2024)
Working Paper: Election-Induced Fiscal Policy Cycles in Emerging Market and Developing Economies (2023)
Working Paper: Election-induced fiscal policy cycles in emerging market and developing economies (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:18708

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP18708

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().