Government Expenditure, Political Cycle & Rent-Seeking

Abstract

Decentralization and direct election have prospective to improve and expand the prosperity of the society and also enhance accountability of the government. On the other hand, competition in the election might create incentive for incumbent to abuse their power to misallocate of the regional budget. This study aims to examine the pattern of regional budget around the election years. Using Indonesian municipals in democratized period as a sample, we find that in the budgetallocation for social expenditure and grant expenditure are more likely to increase two years prior to the election year. These increase become higher close to election year. If the incumbent running for re-election, these expenditures are more likely to increase. We find a weak evidence ofpolitical budget cycle among the incumbent during the election year.

Rent-seeking Practices in the Budget Policymaking Processes at Local Government: Case Studies in Indonesia

“…Salahudin, Achmad Nurmandi, Kisman Karinda, & Tinuk Dwi Cahyani This discussion shows that the practices of corruption, bribery, collusion, lobbying, negotiation, and transactional politics were strongly interrelated in local budget management and fiscal policymaking in Malang City, Malang Regency, and Batu City (Lambsdorff 2002). In other words, the practice of corruption in these municipalities was one of a number of ways that elected official and bureaucrats abused their power and authority to enrich themselves and their allies (Arifin & Purnomowati, 2017). This also shows that the practices of bribery and corruption in these three municipalities cannot be separated from lobbying, negotiation, transactional politics, and collusive relations between elected officials, bureaucrats, and brokers (Adi 2018;Lambsdorff 2002).…”

“…In Malang Regency, collusive relations between the Regent, brokers, bureaucrats, and private-sector actors were used to control the provision of goods and services. More specifically, these collusive relations were used to manipulate the goods and services procurement process in order to benefit the Regent and the brokers, bureaucrats, and private-sector actors allied with him (Arifin & Purnomowati, 2017). These collusive relations were established through the practices of lobbying and negotiation.…”

“…Rather, democratization and decentralization have led to poor governance, with rent-seeking occurring in all government sectors (Asriyadi 2019). It has occurred on a massive scale, with party elites, politicians, bureaucrats, and private-sector actors acting in conjunction to win elections (Arifin & Purnomowati, 2017). This, in turn, has promoted rent-seeking behavior in the bureaucratic sector, with local legislators and executives using their power and authority to 'sell' offices (appoint officeholders in return for bribes) or give offices to their greatest contributors/closest allies (Widanarto, 2017).…”

“…Elections are generally won by politicians who have significant personal capital, already hold office, or receive the financial support of private-sector actors. The financial burden of electoral politics has also promoted rent-seeking behavior in local fiscal policy (Arifin & Purnomowati, 2017).…”