IDEAS home Printed from https://ideas.repec.org/a/bla/jpbect/v7y2005i2p229-252.html
   My bibliography  Save this article

Signaling in Political Budget Cycles: How Far Are You Willing to Go?

Author

Listed:
  • JORGE MIGUEL STREB

Abstract

A key assumption in the literature on political cycles with rational voters and opportunistic politicians is that opportunism is common knowledge. In this framework, political cycles have been interpreted as a signal of competency. However, if opportunism is not common knowledge, cycles may no longer indicate competency, but rather opportunism. This is because highly opportunistic incumbents are willing to go farther to be reelected. Since political cycles require discretionality to reallocate budget items, a decrease of discretionality curbs cycles. It may also make elections more effective at selecting competent incumbents.

Suggested Citation

  • Jorge Miguel Streb, 2005. "Signaling in Political Budget Cycles: How Far Are You Willing to Go?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(2), pages 229-252, May.
    • Handle: RePEc:bla:jpbect:v:7:y:2005:i:2:p:229-252
    DOI: 10.1111/j.1467-9779.2005.00202.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-9779.2005.00202.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-9779.2005.00202.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 55(1), pages 1-16.
    2. Stein, Ernesto H. & Streb, Jorge M., 2004. "Elections and the timing of devaluations," Journal of International Economics, Elsevier, vol. 63(1), pages 119-145, May.
    3. Persson, Torsten & Tabellini, Guido, 1999. "Political economics and macroeconomic policy," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 22, pages 1397-1482, Elsevier.
    4. Jorge Streb, 1999. "Reelection or term limits? The short and the long run view of economic policy," Estudios de Economia, University of Chile, Department of Economics, vol. 26(2 Year 19), pages 187-206, December.
    5. Stein, Ernesto H. & Streb, Jorge M., 2004. "Elections and the timing of devaluations," Journal of International Economics, Elsevier, vol. 63(1), pages 119-145, May.
    6. Banks,Jeffrey S. & Hanushek,Eric Allen (ed.), 1995. "Modern Political Economy," Cambridge Books, Cambridge University Press, number 9780521472333, September.
    7. Alesina, Alberto & Tabellini, Guido, 1988. "Credibility and politics," European Economic Review, Elsevier, vol. 32(2-3), pages 542-550, March.
    8. Svensson, Jakob & Shi, Min, 2002. "Conditional Political Budget Cycles," CEPR Discussion Papers 3352, C.E.P.R. Discussion Papers.
    9. Alberto Alesina & Nouriel Roubini & Gerald D. Cohen, 1997. "Political Cycles and the Macroeconomy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510944, April.
    10. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
    11. William D. Nordhaus, 1975. "The Political Business Cycle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(2), pages 169-190.
    12. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    13. Anthony Downs, 1957. "An Economic Theory of Political Action in a Democracy," Journal of Political Economy, University of Chicago Press, vol. 65(2), pages 135-135.
    14. Banks,Jeffrey S. & Hanushek,Eric Allen (ed.), 1995. "Modern Political Economy," Cambridge Books, Cambridge University Press, number 9780521478106, September.
    15. Susanne Lohmann, 1998. "Rationalizing the Political Business Cycle: A Workhorse Model," Economics and Politics, Wiley Blackwell, vol. 10(1), pages 1-17, March.
    16. Michael Spence, 1973. "Job Market Signaling," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 87(3), pages 355-374.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alejandro Saporiti & Jorge Streb, 2008. "Separation of powers and political budget cycles," Public Choice, Springer, vol. 137(1), pages 329-345, October.
    2. Sebastián Nieto Parra & Javier Santiso, 2008. "Wall Street and Elections in Latin American Emerging Economies," OECD Development Centre Working Papers 272, OECD Publishing.
    3. Joel Sebastián Schneider, 2004. "El rol de los gobernadores opositores en las elecciones presidenciales," CEMA Working Papers: Serie Documentos de Trabajo. 281, Universidad del CEMA.
    4. Stein, Ernesto H. & Streb, Jorge M., 2004. "Elections and the timing of devaluations," Journal of International Economics, Elsevier, vol. 63(1), pages 119-145, May.
    5. Ernesto H. Stein & Jorge M. Streb & Piero Ghezzi, 2005. "Real Exchange Rate Cycles Around Elections," Economics and Politics, Wiley Blackwell, vol. 17(3), pages 297-330, November.
    6. Daniel Lema & Jorge M. Streb, 2013. "Ciclos electorales en política fiscal," CEMA Working Papers: Serie Documentos de Trabajo. 514, Universidad del CEMA.
    7. García, Israel & Hayo, Bernd, 2021. "Political budget cycles revisited: Testing the signalling process," European Journal of Political Economy, Elsevier, vol. 69(C).
    8. Stone, Daniel F., 2013. "Media and gridlock," Journal of Public Economics, Elsevier, vol. 101(C), pages 94-104.
    9. Jorge Streb & Gustavo Torrens, 2013. "Making rules credible: divided government and political budget cycles," Public Choice, Springer, vol. 156(3), pages 703-722, September.
    10. Jorge M. Streb & Daniel Lema & Gustavo Torrens, 2009. "Checks and Balances on Political Budget Cycles: Cross‐Country Evidence," Kyklos, Wiley Blackwell, vol. 62(3), pages 426-447, August.
    11. Wei Zhang, 2014. "Job Market Signalling With Two Dimensions Of Private Information," Bulletin of Economic Research, Wiley Blackwell, vol. 66(2), pages 113-132, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jorge M. Streb, 2011. "Estabilización económica e incentivos políticos," CEMA Working Papers: Serie Documentos de Trabajo. 461, Universidad del CEMA.
    2. Ernesto H. Stein & Jorge M. Streb & Piero Ghezzi, 2005. "Real Exchange Rate Cycles Around Elections," Economics and Politics, Wiley Blackwell, vol. 17(3), pages 297-330, November.
    3. Jorge Streb, 1999. "Reelection or term limits? The short and the long run view of economic policy," Estudios de Economia, University of Chile, Department of Economics, vol. 26(2 Year 19), pages 187-206, December.
    4. Troeger, Vera & Schneider, Christina J., 2012. "Strategic Budgeteering and Debt Allocation," CAGE Online Working Paper Series 85, Competitive Advantage in the Global Economy (CAGE).
    5. Eric Dubois, 2016. "Political business cycles 40 years after Nordhaus," Public Choice, Springer, vol. 166(1), pages 235-259, January.
    6. Daniel Lema & Jorge M. Streb, 2013. "Ciclos electorales en política fiscal," CEMA Working Papers: Serie Documentos de Trabajo. 514, Universidad del CEMA.
    7. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Post-Print hal-01291401, HAL.
    8. Kouvavas, Omiros, 2013. "Political Budget Cycles Revisited, the Case for Social Capital," MPRA Paper 57504, University Library of Munich, Germany, revised 15 Sep 2013.
    9. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291401, HAL.
    10. Vítor Castro & Rodrigo Martins, 2015. "Budget, expenditures composition and political manipulation: Evidence from Portugal," NIPE Working Papers 4/2015, NIPE - Universidade do Minho.
    11. Michał Mackiewicz, 2006. "Przyczyny deficytu finansów publicznych w świetle nowej ekonomii politycznej," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 1-22.
    12. V�tor Castro & Rodrigo Martins, 2016. "Are there political cycles hidden inside government expenditures?," Applied Economics Letters, Taylor & Francis Journals, vol. 23(1), pages 34-37, January.
    13. César Martinelli & John Duggan, 2014. "The Political Economy of Dynamic Elections: A Survey and Some New Results," Working Papers 1403, Centro de Investigacion Economica, ITAM.
    14. Vergne, Clémence, 2009. "Democracy, elections and allocation of public expenditures in developing countries," European Journal of Political Economy, Elsevier, vol. 25(1), pages 63-77, March.
    15. Henrik Jordahl, 2006. "An economic analysis of voting in Sweden," Public Choice, Springer, vol. 127(3), pages 251-265, June.
    16. Castro, Vítor & Martins, Rodrigo, 2018. "Politically driven cycles in fiscal policy: In depth analysis of the functional components of government expenditures," European Journal of Political Economy, Elsevier, vol. 55(C), pages 44-64.
    17. Jorge Streb & Gustavo Torrens, 2013. "Making rules credible: divided government and political budget cycles," Public Choice, Springer, vol. 156(3), pages 703-722, September.
    18. Marco Bonomo & Cristina Terra, 2010. "Electoral Cycles Through Lobbying," Economics and Politics, Wiley Blackwell, vol. 22(3), pages 446-470, November.
    19. Marcos Yamada Nakaguma & Siegfried Bender, 2004. "A Emenda Da Reeleição E A Lei De Responsabilidade Fiscal: Impactos Sobre Ciclos Políticos E Performance Fiscal Dos Estados (1986-2002)," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32nd Brazilian Economics Meeting] 025, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    20. Thierry Warin & Kenneth Donahue, 2006. "The Stability and Growth Pact: A European Answer to the Political Budget Cycle?," Middlebury College Working Paper Series 0606, Middlebury College, Department of Economics.

    More about this item

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jpbect:v:7:y:2005:i:2:p:229-252. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/apettea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.