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Title:Do elections affect the composition of fiscal policy? PDF Logo
Authors:Katsimi, Margarita
Sarantides, Vassilis
Issue Date:2010
Series/Report no.:CESifo working paper 2908
Abstract:This paper investigates the impact of elections on the level and composition of fiscal instruments using a sample of 19 high-income OECD countries that can be characterized as developed, established democracies during the period 1972-1999. We find that elections shift public spending towards current and away from capital expenditures. Moreover, although we find no evidence for an electoral cycle for government deficit and expenditures, we do find a negative effect of elections on revenue. Our results indicate that the fall in revenue in election periods is attributed to a fall in direct taxation. The decomposition of our electoral dummy suggests that fiscal manipulation seems to be concentrated shortly before the elections. Finally, when we distinguish among predetermined and endogenous elections we find that the above results apply only for the predetermined electoral periods while endogenous elections seem to increase the budget deficit and to leave the composition of fiscal policy unaffected.
Subjects:political budget cycles
elections
composition of fiscal policy
quality of public expenditure
JEL:D72
E62
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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