Public Choice

, Volume 159, Issue 1, pp 251-275

First online:

Legislative budget cycles

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Recent literature suggests that electoral budget cycles are a phenomenon of new rather than established democracies. What part of the democratization process explains the amelioration of the political budget cycle? We argue the answer lies (in part) in the development of a strong party system. We extend the classic Rogoff-Siebert model to show that political budget cycles are possible in a legislative context with rational voters. We then demonstrate that the development of a strong party system can restrain political budget cycles in a majoritarian electoral system. Finally, we follow prior work in using vote share volatility as a measure of the institutionalization of the party system. Using newly collected vote-share data for 433 elections for 90 democracies from 1980–2007, we calculate a measure of party institutionalization. We then use this data to demonstrate that institutionalized party systems are associated with mitigated political budget cycles, especially in majoritarian electoral systems.


Political budget cycles Party institutionalization

JEL Classification

H6 D72