Political budget cycles and media freedom |
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| Affiliation: | 1. Department of Economics, University of Sussex, Jubilee Building, Brighton BN1 9SL, United Kingdom;2. Department of Economics, University of St. Gallen, Bodanstrasse 8, 9000 St. Gallen, Switzerland;3. CESifo, Munich, Germany;1. Wageningen University, The Netherlands;2. University of Groningen, The Netherlands;3. De Nederlandsche Bank, The Netherlands;4. CESifo, Munich, Germany;1. University of Siegen Hölderinstr. 3, 57076 Siegen, Germany;2. Research Department, Bank of Israel, POB 780, Jerusalem 91007, Israel;3. ZEW Mannheim, L 7, 1, 68161 Mannheim, Germany;4. Division of Public Administration and Policy, School of Political Science, University of Haifa, 199 Aba Koushy Blvd., Haifa, Israel |
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| Abstract: | This paper examines the effects of elections on the conduct of central governments' fiscal policies. To do so, it uses a unique panel database that includes disaggregated spending and revenue series at the central government level for multiple countries over the 1975–2010 period. Examining political environments under which incumbent governments generate political budget cycles (PBCs), and comparing the relative importance of factors influencing cycles, we identify media freedom as the factor that plays the most critical role. This result provides a micro-foundation for rational opportunistic models for PBCs that rely on asymmetry of information about politicians' competence, and also offers a way to relate different conditioning factors of PBCs, including fiscal transparency and the maturity of democracies. Further, we show that the election-year rise in budget deficits under low media freedom is primarily driven by an increase in the current, not capital, component of public expenditure. |
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| Keywords: | Political budget cycles Central government Voter information Media freedom Fiscal policy composition |
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