Conditional Political Budget Cycles in Argentine Provinces

U of CEMA Working Paper Series No. 389

44 Pages Posted: 7 May 2009

Date Written: December 2008

Abstract

This paper presents evidence of electoraly-motivated changes in the budget balance, public expenditures, composition of public expenditures and provincial revenues in Argentine provinces. The empirical study is made using panel data analysis for 22 provinces during the period 1985-2001. Unconditional results show that conditioning on the alignment of provincial and federal executives (same political party in power) there is evidence of systematic changes in fiscal policies around elections. The observed changes support the predictions of rational opportunistic models of PBC. In election years, total provincial expenditures increase in aligned provinces, without affecting the fiscal balance, because to the increased discretional transfers from the federal government supporting the provincial incumbent federal revenues. By contrast, deficit increases for unaligned provinces. In addition, expenditure shifts toward current spending and away from capital spending for unaligned provinces in electoral years.

JEL Classification: D72, E62

Suggested Citation

Lema, Daniel, Conditional Political Budget Cycles in Argentine Provinces (December 2008). U of CEMA Working Paper Series No. 389, Available at SSRN: https://ssrn.com/abstract=1400174 or http://dx.doi.org/10.2139/ssrn.1400174

Daniel Lema (Contact Author)

Universidad del CEMA ( email )

1054 Buenos Aires
Argentina

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