Political Budget Cycles Revisited: Testing the Signalling Process
Israel Garcia and
Bernd Hayo ()
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Israel Garcia: University of Marburg
MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)
A widespread view in the 'political budget cycles' literature is that incumbent politicians seek to influence voters' perceptions of their competence and/or preferences by using the composition of the fiscal budget as a signalling tool. However, little is known about whether voters actually receive and perceive the signal in that way. To empirically assess the relevance of the signalling channel at the municipal level, we conducted a survey among 2,000 representative German citizens in 2018. Only a small fraction of voters feel well-informed about the fiscal budget signal and use the information it contains to decide whether to vote for the incumbent politician. Persons paying more attention to the signal sent by local politicians live in smaller municipalities, are more satisfied with their economic situation, are more educated, and do not feel that they are being electorally manipulated. Our analysis raises doubt about the relevance of budget composition as a signalling mechanism for voters at the local level.
Keywords: Political budget cycles; Signalling mechanism; Local government; Fiscal policy; Representative population survey; Germany (search for similar items in EconPapers)
JEL-codes: D83 E62 H70 H72 (search for similar items in EconPapers)
Pages: 44 pages
New Economics Papers: this item is included in nep-cdm, nep-mac and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:202014
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