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Polity age and political budget cycles: Evidence from a Danish municipal reform

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  • Aaskoven, Lasse

Abstract

Incumbent incentive for competence-signaling and lack of voter information are generally thought to be factors that increase the prevalence of political budget cycles. These mechanisms should be more prevalent in new political units. Since the creation of new political units is rarely exogenous, however, serious endogeneity issues would be an issue for empirical studies of this subject. To overcome these problems, I use a Danish local government reform—which amalgamated some (but not all) Danish municipalities, thereby creating new political units—in a way that is arguably quasi-experimental to study whether political budget cycles are larger in new political units. Contrary to theoretical predictions, political budget cycles seem to be of a smaller scale in the new municipalities, but only regarding budget cycles in budgetary overruns. The findings are of wider interest for discussions about the mechanisms behind context-conditional political budget cycles.

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  • Aaskoven, Lasse, 2018. "Polity age and political budget cycles: Evidence from a Danish municipal reform," European Journal of Political Economy, Elsevier, vol. 52(C), pages 75-84.
    • Handle: RePEc:eee:poleco:v:52:y:2018:i:c:p:75-84
    DOI: 10.1016/j.ejpoleco.2017.05.002
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    5. Boll, David & Sidki, Marcus, 2021. "The influence of political fragmentation on public enterprises: Evidence from German municipalities," European Journal of Political Economy, Elsevier, vol. 67(C).
    6. García, Israel & Hayo, Bernd, 2021. "Political budget cycles revisited: Testing the signalling process," European Journal of Political Economy, Elsevier, vol. 69(C).

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