Where Does the Political Budget Cycle Really Come From?

Allan Drazen and Adi Brender ()

No 4049, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Whereas a political budget cycle was once thought to be a phenomenon of less-developed economies, some recent studies find such a cycle in a large cross-section of both developed and developing countries. We find that this result is driven by the experience of ?new democracies?, where fiscal manipulation may be effective because of lack of experience with electoral politics or lack of information that voters in more established democracies use. The strong budget cycle in those countries accounts for the finding of a budget cycle in larger samples that include these countries. Once these countries are removed from the larger sample, the political budget cycle disappears. Our findings may reconcile two contradictory views of pre-electoral manipulation, one arguing it is a useful instrument to gain voter support and a widespread empirical phenomenon, the other arguing that voters punish rather than reward fiscal manipulation.

Keywords: Political budget cycle; New democracy; Fiscal manipulation (search for similar items in EconPapers)
JEL-codes: D72 D78 E62 (search for similar items in EconPapers)
Date: 2003-09
New Economics Papers: this item is included in nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

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