Overlapping Political Budget Cycles in the Legislative and the Executive
34 Pages Posted: 3 Dec 2014
Date Written: November 2014
We advance the literature on political budget cycles by testing separately for cycles in expenditures for elections in the legislative and the executive. Using municipal data, we can separately identify these cycles and account for general year effects. For the executive branch, we show that it is important whether the incumbent re-runs. To account for the potential endogeneity associated with this decision, we apply a unique instrumental variables approach based on age and pension eligibility rules. We find sizable and significant effects in expenditures before council elections and before joint elections when the incumbent re-runs.
Keywords: Election cycles, municipal expenditures, council and mayor elections, instrumental variables approach
JEL Classification: H11, H71, H72, H74
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