Public Choice

, Volume 157, Issue 1, pp 305–331

Do re-election probabilities influence public investment?

Article

DOI: 10.1007/s11127-012-9946-8

Cite this article as:
Fiva, J.H. & Natvik, G.J. Public Choice (2013) 157: 305. doi:10.1007/s11127-012-9946-8

Abstract

An insight from dynamic political economy is that elected officials may use state variables to affect the choices of their successors. We exploit the staggered timing of local and national elections in Norway to investigate how politicians’ re-election probabilities affect their investments in physical capital. Because popularity is endogenous to politics, we use an instrumental variable approach based on regional movements in ideological sentiment. We find that higher re-election probabilities stimulate investments, particularly in programs preferred more strongly by the incumbent parties. This aligns with theory where capital and current expenditures are considered complementary inputs to government production.

Keywords

Strategic capital accumulation Incumbent popularity 

JEL Classification

E62 H40 H72 

Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  1. 1.BI Norwegian Business SchoolOsloNorway
  2. 2.Norges BankOsloNorway

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