Do Re-Election Probabilities Influence Public Investment?

55 Pages Posted: 22 Jul 2009

See all articles by Jon H. Fiva

Jon H. Fiva

Norwegian School of Management (BI) - Department of Economics

Gisle James James Natvik

BI Norwegian Business School - Department of Economics

Date Written: July 2009

Abstract

We identify exogenous variation in incumbent policymakers' re-election probabilities and explore empirically how this variation affects the incumbents' investment in physical capital. Our results indicate that a higher re-election probability leads to higher investments, particularly in the purposes preferred more strongly by the incumbents. This aligns with a theoretical framework where political parties disagree about which public goods to produce using labor and predetermined public capital. Key for the consistency between data and theory is to account for complementarity between physical capital and flow variables in government production.

Keywords: political economics, strategic capital accumulation, identifying popularity shocks

JEL Classification: E62, H40, H72

Suggested Citation

Fiva, Jon H. and Natvik, Gisle James James, Do Re-Election Probabilities Influence Public Investment? (July 2009). CESifo Working Paper Series No. 2709, Available at SSRN: https://ssrn.com/abstract=1437488

Jon H. Fiva (Contact Author)

Norwegian School of Management (BI) - Department of Economics ( email )

Oslo
Norway

Gisle James James Natvik

BI Norwegian Business School - Department of Economics ( email )

Nydalsveien 37
Oslo, 0484
Norway

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
71
Abstract Views
541
rank
355,715
PlumX Metrics