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Political business cycles at the municipal level

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  • Linda Veiga
  • Francisco Veiga

Abstract

The present article tests predictions of rational political business cycle models using a large and previously unexplored data set of Portuguese municipalities. This data allows for a clean test of these predictions due to the high level of detail on expenditure items, an exogenous fixed election schedule, and homogeneity of Portuguese local governments with respect to policy instruments and institutions. Estimation results clearly reveal the opportunistic behaviour of local governments. In pre-electoral periods, they increase total expenditures and change their composition favouring items that are highly visible to the electorate. This behaviour is consistent with an effort to signal competence and increase chances of re-election. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • Linda Veiga & Francisco Veiga, 2007. "Political business cycles at the municipal level," Public Choice, Springer, vol. 131(1), pages 45-64, April.
    • Handle: RePEc:kap:pubcho:v:131:y:2007:i:1:p:45-64
    DOI: 10.1007/s11127-006-9104-2
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    More about this item

    Keywords

    Political business cycles; Public finance; Local governments; Elections; Portugal;
    All these keywords.

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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