Political Budget Cycles

Abstract

The political budget cycle—how elections affect government fiscal policy—is one of the most studied subjects in political economy and political science. The key theoretical question is whether incumbent governments can time or structure public finances in ways that improve their chances of reelection; the key empirical question is whether this in fact happens. The incentives of incumbents to engage in such electioneering are governed by political institutions, observability of political choices, and their consequences, as well as voter knowledge, and both theoretical and empirical studies on political budget cycles have recently focused on conditions under which such cycles are likely to obtain. Much recent research focuses on subnational settings, allowing comparisons of governments in similar institutional environments, and a consensus on the presences of cycles in public finances—and in the reporting of public finances—is beginning to emerge.

Partisan-Electoral Cycles in Public Employment: Evidence from Developed Democracies

“…The results of this article also have implications of the wider study of partisan politics and electoral cycles in public policy measure, including those beyond the pure fiscal policy aggregates (Aaskoven and Lassen, 2017). This article suggests that in some policy areas, neither government ideology nor election occurrence might in themselves produce any policy deviations.…”

The Effects of Electoral Incentives on Fiscal Policy: Evidence from a Legislative Change at the Local Government Level

“…2 See Aaskoven and Lassen (2017) for a recent survey, and Veiga, Veiga, and Morozumi (2017) for a recent empirical analysis of the relative importance of factors influencing PBCs on a large panel of countries.…”

Political Corruption Cycles: High-Frequency Evidence from Argentina’s Notebooks Scandal

“… 6. A large literature has examined political business and budget cycles: incumbents increase spending when elections are upcoming (see, e.g., Aaskoven & Dreyer Lassen, 2017 for a review), even in authoritarian regimes (see, e.g., Blaydes, 2011; Magaloni, 2006). Other studies have examined other factors that vary systematically with election proximity, such as the propensity of elected judges of behaving punitively (Huber & Gordon, 2004), the political involvement of bureaucrats (Figueroa, 2016), mafia attacks to politicians (Daniele & Dipoppa, 2017), citizen demands and the responsiveness of politicians to these demands (Dipoppa & Grossman, 2020), and political violence (Harish & Little, 2017).…”

“… 30. On political budget/business cycles, see, for example, Rogoff (1990), Alesina et al (1997), Lohmann (1998), Labonne (2016), and Akhmedov and Zhuravskaya (2004). See Aaskoven and Dreyer Lassen 2017 for a thorough review. Toral (2019) has also shown that political bureaucratic cycles also occur—that is, incumbents hire more bureaucrats around elections. …”