Do Electoral Cycles Differ Across Political Systems?
University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER); Centre for Economic Policy Research (CEPR); Center for Economic Studies and Ifo Institute for Economic Research (CESifo); Bocconi University - Department of Economics
Stockholm University - Institute for International Economic Studies (IIES); London School of Economics & Political Science (LSE); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)
IGIER Working Paper No. 232
Do fiscal policy variables - overall spending, revenue, deficits and welfare-state spending - display systematic patterns in the vicinity of elections? And do such electoral cycles differ among political systems? We investigate these questions in a data set encompassing sixty democracies from 1960-98. Without conditioning on the political system, we find that taxes are cut before elections, painful fiscal adjustments are postponed until after the elections, while welfare-state spending displays no electoral cycle. Our subsequent results show that the pre-election tax cuts is a universal phenomenon. The post-election fiscal adjustments (spending cuts, tax hikes and rises in surplus) are, however, only present in presidential democracies. Moreover, majoritarian electoral rules alone are associated with pre-electoral spending cuts, while proportional electoral rules are associated with expansions of welfare spending both before and after elections.
Number of Pages in PDF File: 24
Keywords: Elections, constitution, form of government, electoral rules, fiscal policy
JEL Classification: A10, H10
Date posted: May 19, 2003