Rationality and the political business cycle: The case of local government

The empirical results which have been reported support the hypotheses' implied by the model of rational political behavior set out in Section 2. In pre-election periods, local government development expenditures deviate significantly from their normal levels. The extent of deviation is approximately 20%.Consistent with the predictions of this model, it is found that incumbents not seeking re-election deviated far more in their pre-election discretionary budget expenditure than incumbents seeking re-election. The expenditure gap between the two types of incumbents is large and statistically significant. Incumbents not seeking re-election exhibit a deviation equivalent to 47% of the development budget, while those seeking re-election exhibit a 12% deviation.