The search for political support leads ultimately to upward deviations from forecasted public deficits. This hypothesis is tested using a data set from Galician municipalities during the period 1985–1995. Econometric estimates demonstrate that single-party majority incumbents are less likely to change forecasted budgets. Moreover, upward deviations in the deficit tend to increase in election years. Incumbent's ideology is not relevant to explain deviations in deficit.
Get full access to this article
View all access options for this article.
References
1.
AlesinaA. and PerottiR.1999. “Budget Deficit and Budget Institutions”, in PoterbaJ. and Von HagenJ., (Eds.). Fiscal Institutions and Performance Fiscal, Chicago: The University of Chicago Press: 13–36.
2.
AlesinaA.PerottiR., and TavaresJ.1998. “The Political Economy of Fiscal Adjustments”, Brookings Papers on Economic Activity, 1: 197–266.
3.
AlesinaA.RoubiniN. and CohenG.D.1997. “Political Parties, Institutions, and Budget Deficits”, in Alesina, A., RoubiniN., and CohenG.D. Political Cycles and the Mac-roeconomy, Cambridge, Mass.: MIT Press: 227–252.
4.
BaleirasR.N. and J. Da Silva, 2004. “To Be or Not to Be in Office Again. That is the Question: Political Bussiness Cycle with Local Governments”, European Journal of Political Economy, 20: 655–671.
5.
BareaJ.1998. Disciplina presupuestaria e integracion de España en la Union Monetaria, Madrid: Real Academia de Ciencias Politicas y Morales.
6.
BeckN, and KatzJ.N.1995. “What to Do (and not to Do) with Time-Series Cross-Section Data”, American Political Science Review, 89: 634–647.
7.
BlaisA. and NadeauR.1992. “The Electoral Budget Cycle”, Public Choice, 74: 389–403.
8.
BoadwayR.2000. “Recent Developments in the Economics of Federalism”, in Lazar, H. (Ed.). Toward a New Mission Statement for Canadian Fiscal Federalism, Kingston: Institute of Intergovernmental Relations: 41–78.
9.
BrenderA.2003. ‘The Effect of Fiscal Performance on Local Government Election Results in Israel: 1989–1998’, Journal of Public Economics, 87: 2187–2205.
10.
BreuschT.S. and PaganA.R.1980. “The Lagrange Multiplier Test and its Application to Model Specifications in Econometrics”, Review of Economic Studies, 47: 239–253.
11.
BrownM. B. and ForsytheA.B.1974. “Robust Tests for the Equality of Variances,” Journal of the American Statistical Association, 69: 364–367.
12.
CastellsA.EstellerA., and VilaltaM.2004. “Full Characterization of the Political Economy of Fiscal Adjustment: Evidence from Spanish Municipalities”, Institut d'Economia de Barcelona (IEB), (www.pcb.ub.es/ieb/serie/doc2004-3. pdf).
13.
CirinconeC.GurrieriG.A., and B. Van de Sande, 1999. “Municipal Government Revenue Forecasting: Issues of Method and Data”, Journal of Public Budgeting and Finance, 19(1)26–46.
14.
De HaanJ. and J. Sturm, 1994. “Political and Institutional Determinants of Fiscal Deficits”, Public Choice, 80: 157–172.
15.
De HaanJ. and J. Sturm, 1997. ‘Political and Economic Determinants of OECD Budget Deficits and Government Expenditures: A Reinvestigation’, European Journal of Political Economy, 13: 739–750.
16.
De HaanJ., MoessenW., Volkerinkand B., 1999. “Budgetary Procedures. Aspects and Changes: New Evidence for Some European Countries”, in PoterbaJ. and Von HagenJ. (Eds.). Fiscal Institutions and Performance Fiscal, Chicago: The University of Chicago Press: 265–299.
17.
De PablosL. and A. Valiño, 2000. Economia del Gasto Publico: Control y Evaluacion, Madrid: Civitas.
18.
EdinP. and OhlssonH.1991. “Political Determinants of Budget Deficits: Coalition Effects versus Minority Effects”, European Economic Review, 35: 1597–1603.
19.
FeenbergD.R.GentryW.GilroyD., and RosenH.S.1989. “Testing the Rationality of State Revenue Forecasts”, the Review of Economics and Statistics, LXXI: 300–308.
20.
FeldL. P. and KirchgässnerG.1999. “Public Debt and Budgetary Procedures: Top Down or Bottom Up? Some Evidence from Swiss Municipalities”, in PoterbaJ. and Von HagenJ. (Eds.). Fiscal Institutions and Performance Fiscal, Chicago: The University of Chicago Press: 151–179.
21.
FiorinaM.1981. Retrospective Voting in American National Elections. New Haven: Yale University Press.
22.
FreyB. (Ed.), 1997. Political Business Cycles, Chentelham: Edward Elgar.
23.
Gonzalez-ParamoJ.M.2001. Costes y Beneficios de la Disciplina Fiscal: la Ley de Estabilidad Presupuestaria, Madrid: IEF.
24.
GrilliV.MasciandaroD., and TabelliniG.1991. “Political and Monetary Institutions and Public Financial Policies in the Industrial Countries”, Economic Policy: An European Forum, 6: 341–392.
25.
HallerbergM. and J. Von Hagen, J, 1999. “Electoral Institutions, Cabinet Negotiations, and Budget Deficits in the European Union”, in J. Poterba, J. and HagenVon, J. (Eds.): Fiscal Institutions and PerformanceFiscal, Chicago: The University of Chicago Press: 209–232.
26.
KontopoulosY. and PerottiR.1999. “Budget Deficit and Budget Institutions”, in PoterbaJ. and HagenVon, J. (Eds.): Fiscal Institutions and PerformanceFiscal, Chicago: The University of Chicago Press: 81–102.
27.
KramerG.1971. “Short Term Fluctuations in U.S. Voting Behavior, 1896–1964”, American Political Science Review, 65: 131–143.
28.
Lago-PeñasS., 2005. “Evolving Federations and Regional Public Deficits: Testing the Bailout Hypothesis in the Spanish Case”, Environment and Planning C: Government and Policy, 23: 437–453.
29.
MarquezG.2004. “Futuro e Perspectivas do Gobierno Local en Galicia”, in Rodríguez, R. (Ed.). Os Concellos Galegos para o Século XXI, Santiago de Compostela: University of Santiago de Compostela: 423–543.
30.
McGrawK. M.1990. “Avoiding Blame: An Experimental Investigation of Political Excuses and Justifications”, British Journal of Political Science, 20: 119–131.
MikesellJ.L.1984. “The Cyclical Sensitivity of State and Local Taxes”, Journal of Public Budgeting and Finance, 4(1)32–39.
33.
Milessi-FerretiG.1997. “The Good, the Bad, and the Ugly”, unpublished (quoted by Alesina and Perotti, 1999).
34.
Monasterio-EscuderoC. and Suarez-PandielloJ.2002. “Local Government Financing and Borrowing: Spain”, in DafflonB.(Ed.). Local Public Finance in Europe, Cheltenham: Edward Elgar: 231–255.
35.
MulasC.2003. “The Political and Economic Determinants of Budgetary Consolidation in Europe”, European Political Economic Review, 1: 15–39.
36.
MussoJ.GraddyE., and GrizardJ.2006. “State Budgetary Processes and Reforms: the California Story”, Journal of Public Budgeting and Finance, 26(4)1–21.
37.
NordhausW.1975. “The Political Business Cycle”, Review of Economic Studies, 42: 169–190.
38.
PennerR.G.2002. “Dealing with Uncertain Budget Forecasts”, Journal of Public Budgeting and Finance, 22(1)1–18.
39.
PesaranN.H.2004. “General Diagnostic Tests for Cross-Section dependence in Panels”, CESifo Working Paper, 1249.
40.
PrzeworskiA.StokesS. C., and ManinB. (Eds.), 1999. Democracy, Accountability, and Representation, New York: Cambridge University Press.
41.
ReviglioF.2001. “Budgetary Transparency for Public Expenditure Control”, IMF Working Paper, WP/01/08.
42.
RoubiniN. and SachsJ.1989. “Political and Economic Determinants of Budget Deficits in the Industrialized Democracies”, European Economic Review, 33: 934–938.
43.
TavaresJ.2004. “Does Right or Left Matter? Cabinets, Credibility, and Fiscal Adjustments”, Journal of Public Economics, 88: 2447–2468.
44.
ValiñoA., 1999. El Endeudamiento de la Hacienda Local. Causas, Caracteristicas y Soluciones, Bilbao: FBBVA.