Treated Politicians, Treated Voters: A Natural Experiment of Political Budget Cycle

42 Pages Posted: 1 Aug 2011 Last revised: 21 Feb 2019

See all articles by Kentaro Fukumoto

Kentaro Fukumoto

Gakushuin University

Yusaku Horiuchi

Dartmouth College - Department of Government

Shoichiro Tanaka

Gakushuin University

Date Written: February 18, 2019

Abstract

When an election is approaching, incumbent politicians are motivated to manipulate the budget, hoping to increase their chances of re-election. Although this so-called political budget cycle (PBC) has been long debated by economists and political scientists, empirical studies on the PBC have yielded mixed results. This is partially because election timing is not randomly assigned, which makes it difficult to make causal inferences about the impact of an impending election on the budget. There also exist ongoing debates over \emph{how} the budget is manipulated for electoral purposes. We address these issues by exploiting a natural experiment in Japan, where the timing of municipal elections is as good as random. We find that total and capital expenditures follow the PBC, but tax revenue does not. We also find that executive elections are associated with the PBC, but legislative elections are not. These results suggest that the patterns of the PBC are conditional on institutional settings and political contexts, implying a need for theories about electoral influence over the budget to be further refined.

Keywords: political budget cycle; natural experiment; Japan; municipality; election timing; ignorability

JEL Classification: H71, H72, D72, E62, P16

Suggested Citation

Fukumoto, Kentaro and Horiuchi, Yusaku and Tanaka, Shoichiro, Treated Politicians, Treated Voters: A Natural Experiment of Political Budget Cycle (February 18, 2019). Available at SSRN: https://ssrn.com/abstract=1902724 or http://dx.doi.org/10.2139/ssrn.1902724

Kentaro Fukumoto (Contact Author)

Gakushuin University ( email )

1-5-1 Mejiro
Toshima-ku Tokyo 171-8588
Japan

HOME PAGE: http://www-cc.gakushuin.ac.jp/~e982440/index_e.htm

Yusaku Horiuchi

Dartmouth College - Department of Government ( email )

204 Silsby Hall
HB 6108
Hanover, NH 03755
United States

HOME PAGE: http://sites.dartmouth.edu/horiuchi/

Shoichiro Tanaka

Gakushuin University ( email )

1-5-1 Mejiro
Toshima-ku Tokyo 171-8588
Japan

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