How Do Budget Deficits and Economic Growth Affect Reelection Prospects? Evidence from a Large Cross-Section of Countries

57 Pages Posted: 24 Jan 2006 Last revised: 24 Apr 2006

See all articles by Adi Brender

Adi Brender

Bank of Israel - Research Department

Allan Drazen

University of Maryland - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: December 2005

Abstract

Conventional wisdom is that good economic conditions or expansionary fiscal policy help incumbents get re-elected, but this has not been tested in a large cross-section of countries. We test these arguments in a sample of 74 countries over the period 1960-2003. We find no evidence that deficits help reelection in any group of countries -- developed and less developed, new and old democracies, countries with different government or electoral systems, and countries with different levels of democracy. In developed countries, especially old democracies, election-year deficits actually reduce the probability that a leader is reelected, with similar negative electoral effects of deficits in the earlier years of an incumbent's term in office. Higher growth rates of real GDP per-capita raise the probability of reelection only in the less developed countries and in new democracies, but voters are affected by growth over the leader's term in office rather than in the election year itself. Low inflation is rewarded by voters only in the developed countries. The effects we find are not only statistically significant, but also quite substantial quantitatively. We also suggest how the absence of a positive electoral effect of deficits can be consistent with the political deficit cycle found in new democracies.

Suggested Citation

Brender, Adi and Drazen, Allan, How Do Budget Deficits and Economic Growth Affect Reelection Prospects? Evidence from a Large Cross-Section of Countries (December 2005). NBER Working Paper No. w11862. Available at SSRN: https://ssrn.com/abstract=872722

Adi Brender

Bank of Israel - Research Department ( email )

PO Box 780
Jerusalem 91007
Israel
+972 2 655 2618 (Phone)
+972 2 655 2657 (Fax)

Allan Drazen (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742-1815
United States
301-405-3477 (Phone)
301-405-7835 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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