Electoral Fiscal Policy in New, Old, and Fragile Democracies
Comparative Economic Studies, Vol. 49, No. 3, 2007
Posted: 28 Apr 2009
Date Written: December 2008
We review research on political budget cycles across countries, including recent findings that they are a phenemenon of new democracies and are statistically insignificant in old, established democracies. We then consider what may account for this and review several hypotheses. Recent empirical work also finds that voters in new democracies do not reward election-year deficit spending, raising questions about explanations focusing on the use of election-year deficits to gain votes. This suggests that the increase in election-year expenditures and deficits in new democracies may reflect attempts to shore up a fragile democracy.
Keywords: political business cycle, election-year deficit spending, new democracies, electoral fiscal policy
JEL Classification: P500, E000
Suggested Citation: Suggested Citation