Do Electoral Cycles Differ Across Political Systems?

Torsten Persson () and Guido Tabellini

No 232, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: Do fiscal policy variables — overall spending, revenue, deficits and welfare-state spending — display systematic patterns in the vicinity of elections? And do such electoral cycles differ among political systems? We investigate these questions in a data set encompassing sixty democracies from 1960-98. Without conditioning on the political system, we find that taxes are cut before elections, painful fiscal adjustments are postponed until after the elections, while welfare-state spending displays no electoral cycle. Our subsequent results show that the pre-election tax cuts is a universal phenomenon. The post-election fiscal adjustments (spending cuts, tax hikes and rises in surplus) are, however, only present in presidential democracies. Moreover, majoritarian electoral rules alone are associated with pre-electoral spending cuts, while proportional electoral rules are associated with expansions of welfare spending both before and after elections.

Date: 2003
New Economics Papers: this item is included in nep-cdm, nep-lam and nep-mac
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