Public Choice

, Volume 156, Issue 1–2, pp 181–194 | Cite as

Electoral cycles in active labor market policies

Article

Abstract

We examine how electoral motives influence active labor market policies that promote (short term) job-creation. Such policies reduce measures of unemployment. Using German state data for the period 1985 to 2004, we show that election-motivated politicians pushed job-promotion schemes before elections.

Keywords

Political business cycles Opportunistic politicians Active labor market policies 

JEL Classification

P16 J08 H72 E62 H61 

References

  1. Aidt, T. S., Veiga, F. J., & Veiga, L. G. (2011). Election results and opportunistic policies: a new test of the rational political business cycle. Public Choice, 148, 21–44. CrossRefGoogle Scholar
  2. Alesina, A. (1987). Macroeconomic policy in a two-party system as a repeated game. The Quarterly Journal of Economics, 102, 651–678. CrossRefGoogle Scholar
  3. Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Review of Economic Studies, 58, 277–297. CrossRefGoogle Scholar
  4. Batool, I., & Sieg, G. (2009). Bread and the attrition of power: economic events and German election results. Public Choice, 141, 151–165. CrossRefGoogle Scholar
  5. Belke, A. (2000). Partisan political business cycles in the German labour market? Empirical tests in the light of the Lucas-critique. Public Choice, 104, 225–283. CrossRefGoogle Scholar
  6. Bell, S. H., & Orr, L. L. (2002). Screaning (and creaming?) applicants to job training programs: the AFDC homemaker—home health aide demonstrations. Labour Economics, 9, 279–301. CrossRefGoogle Scholar
  7. Berger, H., & Woitek, U. (1997). Searching for political business cycles in Germany. Public Choice, 91, 179–197. CrossRefGoogle Scholar
  8. Blais, A., & Nadeau, R. (1992). The electoral budget cycle. Public Choice, 74, 389–403. Google Scholar
  9. Bloom, D., Canning, D., Mansfield, R. K., & Moore, M. (2007). Demographic change, social security systems, and savings. Journal of Monetary Economics, 54, 92–114. CrossRefGoogle Scholar
  10. Blundell, R. W., & Bond, S. R. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87, 115–143. CrossRefGoogle Scholar
  11. Brender, A., & Drazen, A. (2005). Political budget cycles in new versus established democracies. Journal of Monetary Economics, 52, 1271–1295. CrossRefGoogle Scholar
  12. Bruno, G. S. F. (2005a). Approximating the bias of the LSDV estimator for dynamic unbalanced panel data models. Economics Letters, 87, 361–366. CrossRefGoogle Scholar
  13. Bruno, G. S. F. (2005b). Estimation and inference in dynamic unbalanced panel data models with a small number of individuals. Stata Journal, 5, 473–500. Google Scholar
  14. Caplan, B. (2007). The myth of the rational voter. Why democracies choose bad policies. Princeton: Princeton University Press. Google Scholar
  15. Conover, P. J., Feldman, S., & Knight, K. (1986). Judging inflation and unemployment—the origins of retrospective evaluations. Journal of Politics, 48, 565–588. CrossRefGoogle Scholar
  16. Davidson, C., Matusza, S. J., & Nelson, D. (2010). A behavioral model of unemployment, fairness and the political economy of trade policy (Working Paper). Michigan State University. Google Scholar
  17. Efthyvoulou, G. (2011, forthcoming). Political budget cycles in the European Union and the impact of political pressures. Public Choice. doi:10.1007/s11127-011-9795-x.
  18. Ferris, J. S., & Voia, M. C. (2011). Does the expectation or realization of a federal election precipitate Canadian output growth? Canadian Journal of Economics, 36, 107–132. CrossRefGoogle Scholar
  19. Fertig, M., Schmidt, C. M., & Schneider, H. (2006). Active labor market policy in Germany—is there a successful policy strategy? Regional Science and Urban Economics, 36, 399–430. CrossRefGoogle Scholar
  20. Foucault, M., Madies, T., & Paty, S. (2008). Public spending interactions and local politics. Empirical evidence from French municipalities. Public Choice, 137, 57–80. CrossRefGoogle Scholar
  21. Frey, B. S., & Schneider, F. (1978a). An empirical study of politico-economic interaction in the United States. Review of Economics and Statistics, 60, 174–183. CrossRefGoogle Scholar
  22. Frey, B. S., & Schneider, F. (1978b). A politic-economic model of the United Kingdom. Economic Journal, 88, 243–253. CrossRefGoogle Scholar
  23. Goerke, L., Pannenberg, M., & Ursprung, H. W. (2010). A positive theory of the earnings relationship of unemployment benefits. Public Choice, 145, 137–163. CrossRefGoogle Scholar
  24. Graversen, B. K., & van Ours, J. C. (2008). How to help unemployed find jobs quickly: experimental evidence from a mandatory activation program. Journal of Public Economics, 92, 2020–2035. CrossRefGoogle Scholar
  25. Grier, K. (2008). US presidential elections and real GDP growth. Public Choice, 135, 337–352. CrossRefGoogle Scholar
  26. Hagen, T., & Steiner, V. (2000). Von der Finanzierung der Arbeitslosigkeit zur Förderung von Arbeit. Baden-Baden: Nomos. doi:10.1007/s11127-011-9795-x Google Scholar
  27. Hibbs, D. A. (1977). Political parties and macroeconomic policy. The American Political Science Review 71, 1467–1487. CrossRefGoogle Scholar
  28. Katsimi, M., & Sarantidis, V. (2011, forthcoming). Do elections affect the composition of fiscal policy in developed, established democracies? Public Choice. doi:10.1007/s11127-010-9749-8.
  29. Kirchgässner, G. (1986). Rationality, causality, and the relation between economic conditions and the popularity of parties: an empirical investigation for the Federal Republic of Germany, 1971–1982. European Economic Review, 28, 243–268. CrossRefGoogle Scholar
  30. Kluve, J., Lehmann, H., & Schmidt, C. M. (2008). Disentangling treatment effects of active labor market policies: the role of labor force status sequences. Labour Economics, 15, 1270–1295. CrossRefGoogle Scholar
  31. Lalive, R., van Ours, J. C., & Zweimüller, J. (2008). The impact of active labour market programmes on the duration of unemployment in Switzerland. Economic Journal, 118, 235–257. CrossRefGoogle Scholar
  32. Lewis-Beck, M. S., & Paldam, M. (2000). Economic voting: an introduction. Electoral Studies, 19, 113–121. CrossRefGoogle Scholar
  33. Mueller, D. C. (2003). Public Choice III. New York: Cambridge University Press. CrossRefGoogle Scholar
  34. Newey, W. K., & West, K. D. (1987). A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica, 55, 703–708. CrossRefGoogle Scholar
  35. Nordhaus, W. D. (1975). The political business cycle. Review of Economic Studies, 42, 169 190. CrossRefGoogle Scholar
  36. Paldam, M., & Nannestad, P. (2000). What do voters know about the economy? A study of danish data, 1990–1993. Electoral Studies, 19, 363–391. CrossRefGoogle Scholar
  37. Potrafke, N. (2010). Globalization and labor market deregulation: empirical evidence from OECD countries. Review of World Economics, 146, 545–571. CrossRefGoogle Scholar
  38. Potrafke, N. (2011a, forthcoming). Political cycles and economic performance in OECD countries: empirical evidence from 1951–2006. Public Choice. doi:10.1007/s11127-010-9695-5.
  39. Potrafke, N. (2011b). Public expenditures on education and cultural affairs in the West German states: does government ideology influence the budget composition? German Economic Review, 12, 124–145. Google Scholar
  40. Potrafke, N. (2012, forthcoming). Is German domestic social policy politically controversial? Public Choice. doi:10.1007/s11127-011-9800-4.
  41. Reid, B. G. (1998). Endogenous elections, electoral budget cycles and Canadian provincial governments. Public Choice, 97, 35–48. CrossRefGoogle Scholar
  42. Rogoff, K., & Sibert, A. (1988). Elections and macroeconomic policy cycles. Review of Economic Studies, 55, 1–16. CrossRefGoogle Scholar
  43. Roodman, D. (2006). How to do xtabond2: An introduction to “Difference” and “System” GMM in Stata (Working Paper 103). Center for Global Development. Google Scholar
  44. Roodman, D. (2009). A note on the theme of too many instruments. Oxford Bulletin of Economics and Statistics, 71, 135–158. CrossRefGoogle Scholar
  45. Sakurai, S. N., & Menezes-Filho, A. N. (2008). Fiscal policy and reelection in Brazilian municipalities. Public Choice, 137, 301–314. CrossRefGoogle Scholar
  46. Sakurai, S. N., & Menezes-Filho, A. N. (2011). Opportunistic and partisan election cycles in Brazil: new evidence at the municipality level. Public Choice, 148, 233–247. CrossRefGoogle Scholar
  47. Schneider, C. J. (2010). Fighting with one hand tied behind the back: political budget cycles in the German states. Public Choice, 142, 125–150. CrossRefGoogle Scholar
  48. Shi, M., & Svensson, J. (2006). Political budget cycles: do they differ across countries and why? Journal of Public Economics, 90, 1367–1389. CrossRefGoogle Scholar
  49. Stock, J. H., & Watson, M. W. (2008). Heteroskedasticity-robust standard errors for fixed effect panel data regression. Econometrica, 76, 155–174. CrossRefGoogle Scholar
  50. Tellier, G. (2006). Public expenditures in Canadian provinces: an empirical study of politico-economic interactions governments. Public Choice, 126, 367–385. CrossRefGoogle Scholar
  51. Tepe, M., & Vanhuysse, P. (2009). Educational business cycles—the political economy of teacher hiring across German states, 1992–2004. Public Choice, 139, 61–82. CrossRefGoogle Scholar
  52. Thomsen, S. L. (2007). Evaluating the employment effects of job creation schemes in Germany. Heidelberg: Physica-Verlag. Google Scholar
  53. Ursprung, H. W. (1984). Macroeconomic performance and government popularity in New Zealand. Comparative Political Studies, 16, 457–477. CrossRefGoogle Scholar
  54. Veiga, L. G., & Veiga, F. J. (2007). Political business cycles at the municipal level. Public Choice, 131, 45–64. CrossRefGoogle Scholar
  55. Wooldridge, J. M. (2002). Econometric analysis of cross section and panel data. Cambridge: MIT Press. Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Faculty of Economics and Social SciencesEberhard Karls University TübingenTübingenGermany
  2. 2.Department of EconomicsUniversity of KonstanzKonstanzGermany

Personalised recommendations