Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/163259
Authors: 
Garofalo, Pablo
Lema, Daniel
Streb, Jorge M.
Year of Publication: 
2016
Series/Report no.: 
Serie Documentos de Trabajo, Universidad del CEMA 601
Abstract: 
To understand how intergovernmental relations affect political budget cycles (PBCs) within federal countries, we model the credibility problems of discretionary fiscal policy in combination with a national incumbent that favors aligned districts. Analyzing Argentina's provinces during the 1985-2001 period, unsurprisingly, provincial budget balances worsen in electoral years, and aligned provinces (where the governor belongs to the president's party) receive larger federal transfers and have larger public expenditures during the governor's entire term. The main interaction effect in electoral years is that provincial budget balances only deteriorate in unaligned provinces, which receive less federal transfers. Furthermore, average federal transfers boost the vote for aligned governors. Two broad implications are that studies of subnational PBCs are biased by an omitted factor (discretional federal transfers), and that governors unaffiliated with the president suffer a "Cinderella" effect at the polls which helps the president dominate national politics.
Subjects: 
federal countries
discretional transfers
party alignment
distributive politics
subnational political budget cycles
JEL: 
D72
E62
ISBN: 
978-987-3940-10-1
Document Type: 
Working Paper

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