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Public Choice

, Volume 131, Issue 1–2, pp 45–64 | Cite as

Political business cycles at the municipal level

  • Linda Gonçalves VeigaEmail author
  • Francisco José Veiga
Original Article

Abstract

The present article tests predictions of rational political business cycle models using a large and previously unexplored data set of Portuguese municipalities. This data allows for a clean test of these predictions due to the high level of detail on expenditure items, an exogenous fixed election schedule, and homogeneity of Portuguese local governments with respect to policy instruments and institutions. Estimation results clearly reveal the opportunistic behaviour of local governments. In pre-electoral periods, they increase total expenditures and change their composition favouring items that are highly visible to the electorate. This behaviour is consistent with an effort to signal competence and increase chances of re-election.

Keywords

Political business cycles Public finance Local governments Elections Portugal 

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Copyright information

© Springer Science+Business Media, LLC 2006

Authors and Affiliations

  • Linda Gonçalves Veiga
    • 1
    Email author
  • Francisco José Veiga
    • 1
  1. 1.Núcleo de Investigação em Políticas EconómicasUniversidade do MinhoBragaPortugal

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