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General or Central Government? Empirical Evidence on Political Cycles in Budget Composition Using New Data for OECD Countries

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  • Niklas Potrafke
Abstract
Previous studies used general government data to examine whether national governments’ electoral motives and ideology influenced budget composition in OECD countries. General government data includes, however, the state and local level. Using new data for general and central government over the period 1995-2016, I reexamine political cycles in budget composition. The results suggest that, both at the general and central government level, leftwing governments spent more on education and less on public services than rightwing governments. Defense expenditure was somewhat lower under leftwing than rightwing governments and in election years; especially in federal states. Effects of government ideology on the individual expenditure categories are larger at the central than general government level. Scholars need to re-examine results on ideology-induced effects that have been derived from general government data where central government data should have been used.

Suggested Citation

  • Niklas Potrafke, 2020. "General or Central Government? Empirical Evidence on Political Cycles in Budget Composition Using New Data for OECD Countries," CESifo Working Paper Series 8134, CESifo.
    • Handle: RePEc:ces:ceswps:_8134
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    Cited by:

    1. Hazwan Haini & Pang Wei Loon, 2021. "Does Government Ideology Affect the Relationship Between Government Spending and Economic Growth?," Economic Papers, The Economic Society of Australia, vol. 40(3), pages 209-216, September.
    2. Fuest, Clemens & Gründler, Klaus & Potrafke, Niklas & Ruthardt, Fabian, 2024. "Read my lips? Taxes and elections," Journal of Public Economics, Elsevier, vol. 236(C).
    3. Niklas Potrafke, 2019. "Fiscal Performance of Minority Governments: New Empirical Evidence for OECD Countries," CESifo Working Paper Series 7733, CESifo.
    4. Potrafke Niklas & Schaltegger Christoph A., 2022. "Fiscal Rules: Anchors of Stability," The Economists' Voice, De Gruyter, vol. 19(1), pages 59-62, June.
    5. Johannes Blum, 2021. "Democracy’s third wave and national defense spending," Public Choice, Springer, vol. 189(1), pages 183-212, October.
    6. Gianluca Cafiso & Roberto Cellini, 2022. "Market-Induced Fiscal Discipline in Europe," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 8(2), pages 259-287, July.
    7. Stephan Schneider & Sven Kunze, 2021. "Disastrous Discretion: Ambiguous Decision Situations Foster Political Favoritism," KOF Working papers 21-491, KOF Swiss Economic Institute, ETH Zurich.
    8. Bellani, Luna & Scervini, Francesco, 2020. "Heterogeneity in preferences for redistribution and public spending: A cross-country analysis," European Journal of Political Economy, Elsevier, vol. 63(C).
    9. Havlik, Annika, 2020. "Political budget cycles in European public procurement," ZEW Discussion Papers 20-069, ZEW - Leibniz Centre for European Economic Research.
    10. Klomp, Jeroen, 2023. "Political budget cycles in military expenditures: A meta-analysis," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 1083-1102.
    11. Román-Aso, Juan A. & Bellido, Héctor & Olmos, Lorena, 2024. "Does corruption pollute the wheel? An analysis for OECD countries," Ecological Economics, Elsevier, vol. 223(C).
    12. Jordi Sanjuán & Pau Rausell & Vicente Coll & Raül Abeledo, 2020. "Mayors, Using Cultural Expenditure in An Opportunistic Way Improves the Chances of Re-Election, but Do Not Do It: Revisiting Political Budget Cycles," Sustainability, MDPI, vol. 12(21), pages 1-15, October.
    13. Florian Dorn, 2021. "Elections and Government Efficiency," ifo Working Paper Series 363, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    14. Di Guilmi, Corrado & Galanis, Giorgos & Proaño, Christian R., 2023. "A Baseline Model of Behavioral Political Cycles and Macroeconomic Fluctuations," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 50-67.
    15. Klomp, Jeroen, 2023. "Defending election victory by attacking company revenues: The impact of elections on the international defense industry," European Journal of Political Economy, Elsevier, vol. 79(C).
    16. Konstantin Kolev & Maya Tsoklinova, 2023. "Economic Interventionism Under Pandemic Conditions: Similarities And Differences On EU Level," Economic Archive, D. A. Tsenov Academy of Economics, Svishtov, Bulgaria, issue 1 Year 20, pages 55-74.
    17. Michele Salvi & Christoph A. Schaltegger, 2023. "Tax more or spend less? Historical evidence from Switzerland’s federal budget plans," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(3), pages 678-705, June.
    18. Välilä, Timo, 2024. "Fiscal sustainability and the composition of government investment: The case of investment in road infrastructure," Transport Policy, Elsevier, vol. 145(C), pages 105-125.

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    More about this item

    Keywords

    general and central government; budget composition; partisan politics; government ideology; electoral cycles; OECD countries; panel data models;
    All these keywords.

    JEL classification:

    • 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
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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