How Do Budget Deficits and Economic Growth Affect Reelection Prospects? Evidence from a Large Panel of Countries
Posted: 13 Aug 2009
Date Written: August 13, 2009
We test conventional wisdom that good economic conditions and expansionary fiscal policy help incumbents get reelected in a panel of 74 democracies over 1960-2003. We find no evidence that deficits help reelection in any group of countries independent of level of development, level or age of democracy, or government or electoral system. In developed countries and old democracies, deficits in election years or over the term of office reduce the probability of reelection. Higher growth rates over the term raise the probability of reelection only in developing countries and in new democracies. Low inflation is rewarded by voters only in the developed countries. These effects are both statistically significant and quite substantial quantitatively.
Keywords: political budget cycle, political business cycle, fiscal manipulation
JEL Classification: D72, E62, H62
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