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Election Results And Opportunistic Policies: An Integrated Approach

Author

Listed:
  • Toke S. Aidt

    (University of Cambridge, Faculty of Economics)

  • Francisco José Veiga

    (Universidade do Minho and NIPE, Escola de Economia e Gestão)

  • Linda Gonçalves Veiga

    (Universidade do Minho and NIPE, Escola de Economia e Gestão)

Abstract

The literature on political business cycles suggests that politicians systematically manipulate economic and fiscal conditions before elections. The literature on vote and popularity functions suggests that economic conditions systematically affect election outcomes. This paper integrates these two strands of literature. We use Rogoff (1990)’s model of the rational political business cycle to derive the two-way relationship between the win-margin of the incumbent politician and the size of the opportunistic distortion of fiscal policy. This relationship is estimated, for a panel of 275 Portuguese municipalities (from 1979 to 2001), as a system of simultaneous equations (by GMM). The results show that (1) opportunism pays off, leading to a larger win-margin for the incumbent; (2) incumbents behave more opportunistically when their win-margin is small. These results are consistent with the theoretical model.

Suggested Citation

  • Toke S. Aidt & Francisco José Veiga & Linda Gonçalves Veiga, 2008. "Election Results And Opportunistic Policies: An Integrated Approach," GEE Papers 0007, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Apr 2008.
    • Handle: RePEc:mde:wpaper:0007
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    References listed on IDEAS

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    1. Bernardino Benito & Francisco Bastida & Cristina Vicente, 2013. "Municipal elections and cultural expenditure," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 37(1), pages 3-32, February.
    2. Jon Fiva & Gisle Natvik, 2013. "Do re-election probabilities influence public investment?," Public Choice, Springer, vol. 157(1), pages 305-331, October.
    3. Jon Fiva & Gisle Natvik, 2013. "Do re-election probabilities influence public investment?," Public Choice, Springer, vol. 157(1), pages 305-331, October.

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    More about this item

    Keywords

    Voting and popularity functions; opportunism; rational political business cycles; local government; system estimation; Portugal.;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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