Party Alignment and Political Budget Cycles: The Argentine Provinces

Serie Documentos de Trabajo - Documento Nro. 520

48 Pages Posted: 18 Oct 2013

See all articles by Daniel Lema

Daniel Lema

Universidad del CEMA

Jorge M. Streb

Universidad del CEMA

Date Written: September 1, 2013

Abstract

The links between subnational political budget cycles (PBCs) and the national government in federal countries have seldom been studied. We study the behavior of the budget balance, public expenditures, and revenues in Argentine provinces during the 1985-2001 period. We find that in election years public expenditures increase, but revenues also do — a result exactly contrary to the predictions of rational opportunistic models of aggregate PBCs — and the budget deficit does not increase significantly. Since the increase in provincial revenues is due to larger federal transfers, we incorporate the influence of party alignment between governors and president. Public expenditures in election years increase in aligned provinces because of larger federal transfers, without affecting the budget deficit; in contrast, the budget deficit tends to increase in unaligned provinces. The federal government thus plays a key role in subnational PBCs, with an electoral cycle in the allocation of federal transfers.

Keywords: political budget cycles, federal countries, discretional transfers, tactical allocation, party alignment, distributive politics

JEL Classification: D72, E62

Suggested Citation

Lema, Daniel and Streb, Jorge Miguel, Party Alignment and Political Budget Cycles: The Argentine Provinces (September 1, 2013). Serie Documentos de Trabajo - Documento Nro. 520 , Available at SSRN: https://ssrn.com/abstract=2341228 or http://dx.doi.org/10.2139/ssrn.2341228

Daniel Lema

Universidad del CEMA ( email )

1054 Buenos Aires
Argentina

Jorge Miguel Streb (Contact Author)

Universidad del CEMA ( email )

Av. Cordoba 374
Buenos Aires, CABA
Argentina

HOME PAGE: http://www.ucema.edu.ar/u/jms/

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