The Political Budget Cycle is Where You Can't See it: Transparency and Fiscal Manipulation

EPRU Working Paper No. 2005-03

43 Pages Posted: 21 Apr 2005

See all articles by David Dreyer Lassen

David Dreyer Lassen

University of Copenhagen - Department of Economics

James E. Alt

Harvard University - Department of Government

Date Written: March 2005

Abstract

We investigate the effects of fiscal transparency and political polarization on the prevalence of electoral cycles in fiscal balance. The recent political economy literature on electoral cycles identifies such cycles mainly in weak and recent democracies. In contrast, we show, conditioning on a new index of institutional fiscal transparency, that electoral cycles in fiscal balance are a feature also of advanced industrialized economies. Using a sample of nineteen OECD countries in the 1990's, we identify a persistent pattern of electoral cycles in low(er) transparency countries, while no such cycles can be observed in high(er) transparency countries. Furthermore, we find, in accordance with recent theory, that electoral cycles are larger in more politically polarized countries.

Keywords: fiscal transparency, political polarization, fiscal policy, budget deficits, political budget cycles, electoral policy cycles

JEL Classification: D72, E62, H62, H83

Suggested Citation

Lassen, David Dreyer and Alt, James E., The Political Budget Cycle is Where You Can't See it: Transparency and Fiscal Manipulation (March 2005). EPRU Working Paper No. 2005-03, Available at SSRN: https://ssrn.com/abstract=705021 or http://dx.doi.org/10.2139/ssrn.705021

David Dreyer Lassen (Contact Author)

University of Copenhagen - Department of Economics ( email )

Studiestraede 6
DK 1455 Copenhagen
Denmark
+45 3532 4412 (Phone)
+45 3532 4444 (Fax)

James E. Alt

Harvard University - Department of Government ( email )

1737 Cambridge Street
Cambridge, MA 02138
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
323
Abstract Views
2,253
rank
120,191
PlumX Metrics