Vorträge des DIW Berlin

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Vortrag

Taxation in a Global Economy : 71st Annual Conference of the International Institute of Public Finance (IIPF 2015)
Dublin, Irland, 20.08.2015 - 23.08.2015

Overlapping Political Budget Cycles
Dirk Foremny, Ronny Freier, Marc-Daniel Moessinger, Mustafa Yeter

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Abstract:

We advance the literature on political budget cycles by testing for cycles in expenditures for elections in the legislative and the executive. Using municipal data, we can identify these cycles independently for the two branches, evaluate the effects of random overlaps, and account for general year effects. We find sizable and significant effects in expenditures before elections for the legislative and even larger effects before joint elections. In the case of overlapping elections, we show that it is important whether the executive incumbent re-runs. To account for the potential endogeneity associated with this decision, we apply an IV approach based on age and pension eligibility rules.

JEL-Classification:

H11;H71;H72;H74

Keywords:

election cycles, municipal expenditures, council and mayor elections, instrumental variables approach