Working Paper: NBER ID: w11085
Authors: Allan Drazen; Marcela Eslava
Abstract: We present a model of the Political Budget Cycle in which voters and politicians have preferences for different types of government spending. Incumbents try to influence voters by changing the composition of government spending, rather than overall spending or revenues. Rational voters may support an incumbent who targets them with spending before the election even though such spending may be due to opportunistic manipulation, because it can also reflect sincere preference of the incumbent for types of spending voters favor. Classifying expenditures into those which are targeted to voters and those that are not, we provide evidence supporting our model in data on local public finances for all Colombian municipalities. Our findings indicate both a pre-electoral increase in targeted expenditures, combined with a contraction of other types of expenditure, and a voter response to targeting.
Keywords: political budget cycle; electoral manipulation; government spending; voter behavior; Colombia
JEL Codes: D78; E62; H72
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Incumbents increase targeted expenditures (H59) | Voter perception of competence (K16) |
| Voter perception of competence (K16) | Chances of reelection (D72) |
| Incumbents increase targeted expenditures (H59) | Chances of reelection (D72) |
| Incumbents shift spending towards voter-favored categories (D72) | Increase in targeted expenditures (H59) |
| Increase in targeted expenditures (H59) | Positive voter response (K16) |
| High overall deficits (H62) | Voter penalization of incumbents (D72) |
| Access to information about voter preferences (D72) | Incumbents' ability to manipulate expenditure composition (H61) |
| Political context (presence of swing voters) (D72) | Incumbents' ability to manipulate expenditure composition (H61) |