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Do elections affect the composition of fiscal policy in developed, established democracies?

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Abstract

This paper investigates the impact of elections on the level and composition of fiscal instruments using a sample of 19 high-income OECD democracies during the period 1972–1999. We find that elections shift public spending towards current expenditures at the cost of public investment. Although we find no evidence for an electoral cycle for government deficit and overall expenditures, we find a negative effect of elections on revenue attributed to a fall in direct taxation. Our results apply for predetermined electoral periods while endogenous elections seem to increase deficit and leave the composition of fiscal policy unaffected.

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Authors and Affiliations

  1. Department of International and European Economic Studies, Athens University of Economics and Business, Patision Str. 76, Athens, 10434, Greece

    Margarita Katsimi

  2. CESifo, Munich, Germany

    Margarita Katsimi

  3. Athens University of Economics and Business, Athens, Greece

    Vassilis Sarantides

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  1. Margarita Katsimi
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  2. Vassilis Sarantides
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Correspondence to Margarita Katsimi.

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Katsimi, M., Sarantides, V. Do elections affect the composition of fiscal policy in developed, established democracies?. Public Choice 151, 325–362 (2012). https://doi.org/10.1007/s11127-010-9749-8

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  • DOI: https://doi.org/10.1007/s11127-010-9749-8

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