Overlapping Political Budget Cycles in the Legislative and the Executive

34 Pages Posted: 15 Dec 2014

See all articles by Dirk Foremny

Dirk Foremny

University of Barcelona - Institut d'Economia de Barcelona (IEB) ; CESifo (Center for Economic Studies and Ifo Institute)

Ronny Freier

German Institute for Economic Research (DIW Berlin)

Marc-Daniel Moessinger

Centre for European Economic Research (ZEW)

Mustafa Yeter

ZEW – Leibniz Centre for European Economic Research

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Date Written: November 25, 2014

Abstract

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

Suggested Citation

Foremny, Dirk and Freier, Ronny and Moessinger, Marc-Daniel and Yeter, Mustafa, Overlapping Political Budget Cycles in the Legislative and the Executive (November 25, 2014). ZEW - Centre for European Economic Research Discussion Paper No. 14-099, Available at SSRN: https://ssrn.com/abstract=2538400 or http://dx.doi.org/10.2139/ssrn.2538400

Dirk Foremny

University of Barcelona - Institut d'Economia de Barcelona (IEB) ( email )

c/ John M. Keynes, 1-11
Barcelona, 08034
Spain

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Ronny Freier

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Marc-Daniel Moessinger (Contact Author)

Centre for European Economic Research (ZEW) ( email )

L7,1
Mannheim, DE 68161
Germany
+49 621 1235 161 (Phone)
+49 621 1235 223 (Fax)

HOME PAGE: http://www.zew.de/en/mitarbeiter/mitarbeiter.php3?action=mita&kurz=mdm

Mustafa Yeter

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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