disaggregating china s local political budget cycles righting the u abstract what impact does spending time horizon have on political budget cycles while traditional political budget cycles increase visible spending with immediate gains before political turnover i hypothesize that spending in categories with less immediate gains categories increases when opportunity costs are lower in this article i build on existing literature on budget cycles in both democracies and non democracies to disaggregate types of budget cycles those with long run versus short run benefits in china after central level reforms welfare targets with long run gains became visible to local leaders constituents the central leaders above them local leaders then had an incentive to provide welfare but only when it was the least costly in terms of opportunity costs using fixed effects models panel data from china s 333 municipalities for 1994 2012 i find welfare spending minimizes both relatively and absolutely around year three and maximizes at the beginning and end of a politician s tenure when opportunity costs and probability of political advancement are lowest these cycles are the most dramatic in western provinces where education is a particularly important tool for ideological spread health and social security spending also see expansion at the end of mayor s tenures although the cycles are less pronounced than in education spending this study expands the literature on political budget cycles by disaggregating government spending and considering the impact of timeliness on cycles

fuel demand elasticities for energy and environmental policies indian sample survey evidence india has been running large scale interventions in the energy sector over the last decades still there is a dearth of reliable and readily available price and income elasticities of demand to base these on especially for domestic use of traditional fuels this study uses the linear approximate almost ideal demand system la aids using micro data of more than 100 000 households sampled across india the la aids model is expanded by specifying the intercept as a linear function of household characteristics marshallian and hicksian price and expenditure elasticities of demand for four main fuels are estimated for both urban and rural areas by different income groups these can be used to evaluate recent and current energy policies the results can also be used for energy projections and carbon dioxide simulations given different growth rates for different segments of the indian population

temporal aggregation in political budget cycles electoral cycles have been widely debated since the pioneering studies of the 1970s on monetary and fiscal policy 1 drazen sums up the evidence in terms of active fiscal policy and passive monetary policy while expansionary fiscal policy is the main impulse behind electoral cycles monetary policy has an accommodating role 2 recently there has been a flurry of empirical work on political budget cycles pbcs using cross country panels the most influential works concentrate on the budget surplus because it can capture both increases in expenditures and tax cuts before elections and is thus the most sensitive indicator of aggregate pbcs 3a drawback of these extant studies is their reliance on annual observations since elections take place between january and december annual data do not allow one to identify the election year precisely to get around this problem other schemes have been proposed for example by the rule of the semester the previous year is counted as the election year if elections take place before july 4 what are the consequences of temporal aggregation for the measurement of pbcs instead of being concentrated in the election year pre electoral effects may be spread out over the two years leading up to elections more important if the sign of policies is reversed after elections lower frequency data may mask pbcs because the effects in the election year cancel out as akhmedov and zhuravskaya point out in their country study of russia 5to illustrate the differences between using annual and quarterly data to identify the election year imagine that elections take place in june furthermore assume there is a pre electoral deterioration in the budget surplus surplus 1 during the four quarters running up to elections followed by an improvement surplus 1 the next four quarters in the calendar year in which elections take place the net effect on the budget surplus is zero elections are not always in june of course what happens if elections are evenly spread out over the year table 1 presents a simulation where y 0 is the calendar year of elections y 1 is the year before and y 1 is the year after for elections in the first quarter of the election year namely y 0 q 1 our textbook example of a pre electoral expansion in the deficit during the four quarters prior to elections followed by a contraction the next four quarters implies that the surplus equals 1 from y 1 q 2 to y 0 q 1 it equals 1 from y 0 q 2 to y 1 q 1 and it equals 0 otherwise when the budget surplus is at its average value normalized here at zero the same procedure is followed for elections in the other three quarters if we aggregate the effects by calendar year there is a serious underestimation of pbcs in the election year since pre electoral expansions are almost cancelled out by post electoral contractions leaving a net expansive effect that is only 25 percent of the total stimulus before elections the least affected by temporal aggregation are post electoral fiscal adjustments since 62 5 percent of the total effect is reflected the year after elections on the other hand if there were no post electoral fiscal adjustments the problem of temporal aggregation would be much less severe since 62 5 percent of the total expansive effect would be reflected the calendar year of elections and 37 5 percent the year before this paper tackles the issue of temporal aggregation in pbcs head on we build a cross country panel with annual and quarterly data from nineteen latin american countries and twenty member states of the organization for economic cooperation and development oecd over the 1980 2005 period 6 quarterly data allow us to identify the election year more precisely with annual data the election year is the calendar year in which elections take place with quarterly data the election year comprises the election quarter plus the three prior quarters we introduce two nonstandard features in our analysis

fiscal policy outcomes and electoral accountability in american states clear fiscal policy effects appear in american state gubernatorial and legislative elections between 1968 and 1992 independent of the effects of incumbency coattails term limits and macroeconomic conditions the results show that accountability is generally stronger following a period of unified party control than under divided government voter reactions to taxes and spending relative to the state economy are conditional on expectations which differ for each party net of these expectations republican gubernatorial candidates lose votes if their party is responsible for unanticipated increases in the size of the state budget democrats do not and indeed may be rewarded for small increases independent of this the incumbent governor s party is punished in legislative elections for failing to maintain fiscal balance taken together these results show how electoral accountability for fiscal policy outcomes is strong but highly contingent on a complex configuration of party labels partisan control expectations and institutions

line item veto where is thy sting roponents of giving the president the authority to use a line item veto argue that the institutional change is needed to limit special interest legislation and restrain spending opponents respond that it would grant too much added power to the president thereby upsetting the delicate balance wisely crafted by the founding fathers this article focuses on the presumption evidently shared by both sides in the debate that adoption of item veto authority will have significant consequences in terms of budget outcomes and the distribution of power 1 curiously there presently exists little empirical support for the presumption that item veto authority is important most studies comparing states with various types of veto authority have failed to detect significant effects associated with item veto additional tests of our own are consistent with these results after reviewing the empirical evidence we reconsider the alleged effects of item veto authority by seating the popular depiction in an explicit model of the budgetary process formal modeling exposes logical inconsistencies contained in popular veto discourse further the model makes clear that the predicted consequences of item veto commonly projected as ubiquitous in fact arise only in select settings

macroeconomic policy in a two party system as a repeated game this paper considers the interaction of two parties with different objectives concerning inflation and unemployment and rational and forward looking wage setters if discretionary policies are followed an economic cycle related to the political cycle results in equilibrium this cycle is significantly different from the traditional political business cycle reputational mechanisms due to the repeated interaction of the two parties and the public or commitments to a common policy rule can improve upon the discretionary outcome by reducing or eliminating the magnitude of the economic fluctuations

capital budgets borrowing rules and state capital spending abstract this paper compares the level and composition of government spending in u s states that maintain separate budgets for capital and operating expenditures with that in states that employ unified budgets it also investigates the effects of pay as you go financing rules for capital projects the empirical findings suggest that states with separate capital budgets spend more on public capital projects than comparable states with unified budgets there is no evidence that the presence or absence of a capital budget affects the level of non capital spending pay as you go requirements for financing capital projects are associated with lower levels of both capital and non capital spending

do fiscal rules dampen the political business cycle this paper develops and tests the theory that fiscal rules limit politicians ability to manipulate the budget for electoral gain using panel data from the american states i find evidence suggesting that stringent balanced budget rules dampen the political business cycle that is while spending rises before and falls after elections in states that can carry deficits into the next fiscal year this pattern does not exist in states with strict no carry rules neither binding gubernatorial term limits nor the partisan composition of government appear to significantly affect the magnitude of the political business cycle

political business cycles 40 years after nordhaus the aim of this article is to survey the huge literature that has emerged in the last four decades following nordhaus s rev econ stud 42 2 169 190 1975 publication on political business cycles pbcs i first propose some developments in history of thought to examine the context in which this ground breaking contribution saw the light of the day i also present a simplified version of nordhaus s model to highlight his key results i detail some early critiques of this model and the fields of investigations to which they gave birth i then focus on the institutional context and examine its influence on pbcs the actual research agenda finally i derive some paths for future research

state responses to fiscal crises the effects of budgetary institutions and politics this paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits more restrictive state fiscal institutions such as no deficit carryover rules and tax and expenditure limitations are correlated with more rapid fiscal adjustment to unexpected deficits political factors are also important when a single party controls the state house and the governorship deficit adjustment is much faster than when party control is divided in gubernatorial election years tax increases and spending cuts are both significantly smaller than at other times

the impact of late budgets on state government borrowing costs abstract we analyze how a key component of fiscal governance the ability of governments to pass a budget on time affects government bond yield spreads based on a sample of 36 us states from 1988 to 1997 and using an original data set on budget enactment dates we estimate that a 30 day budget delay has a cumulative impact that is equivalent to a one time increase in the yield spread of around 10 basis points states with sufficient liquidity incur no costs from late budgets while unified governments face large penalties from not finishing a budget on time

a note on the empirical effectiveness of formal fiscal restraints abstract an important agrument in the current debate over european monetary integration is that a monetary union requires formal fiscal restraints limiting individual member states budgetary powers to reduce the common monetary authority s risk of having to bail out insolvent member governments this note presents empirical evidence on the effectiveness of fiscal restraints on state budgets in the united states nonparametric tests reveal that fiscal restraints significantly affect the probability of fiscal choices and performance without however preventing extreme outcomes fiscal restraints induce substitution of nonrestricted for restricted debt instruments

money politics and the post war business cycle abstract the political economy literature has enshrined as stylized fact the view that lower inflation and temporarily lower growth follow the election of republican presidents and has emphasized political manipulation of monetary policy as an explanation support for the monetary explanation comes in econometric work that largely ignores identification issues that dominate the literature on measuring the effects of monetary policy we generalize a standard vector autoregression framework to accommodate discrete political party variables we find almost no support for the view that political effects on the macroeconomy operate through monetary policy and only weak evidence that political effects are significant at all

empowering change the effects of energy provision on individual aspirations in slum communities this paper discusses the role of energy provision in influencing the social aspirations of people living in slums we examine factors that influence the shift in aspirations in five slum settlements using data from 500 interviews conducted in serviced and non serviced slums from the state of gujarat in india the non serviced slums did not have access to basic services namely water sanitation energy roads solid waste and rainwater management we find empirical evidence which suggests that when basic infrastructure provisions are met slum dwellers shift their focus from lower order aspirations to the higher order aspirations like health education housing and land ownership we argue that energy provision enhances productivity and enables slum dwellers to shift their aspirations upwards furthermore we test the effect of work days lost due to illness on the relationship between higher order aspirations and aspirations for energy provision when provision of energy is low higher work day loss dampens higher order aspirations for policy makers this study highlights the critical link between the infrastructure services preferred by slum dwellers and their social aspirations for growth

explaining government growth in the u s states despite the explosive increase in the research program on government growth in recent years little work has been done on government growth disaggregated to the subnational level i examine the empirical validity of five competing models of government growth for the fifty u s states from 1945 to 1984 wagner s law fiscal illusion party control bureau voting and intergovernmental grant government size is defined in terms of state government spending as a proportion of total state economic output with separate implicit price deflators being employed for the public and private sectors based on a longitudinal test of these competing models the analysis uncovers strong empirical support for the bureau voting and intergovernmental grant models moderately weak support for the wagner s law model and virtually no support for the fiscal illusion and party control explanations these findings have important implications for the study of government growth in general and more specifically in the states

electoral cycles in government employment evidence from us gubernatorial elections abstract incumbents may opportunistically design policies increasing employment before elections or postpone cuts until afterwards i investigate electoral cycles in public sector employment around us gubernatorial elections exploiting staggered gubernatorial election cycles across states i use both county fixed effects models and a geographic discontinuity design that compares neighboring counties at state borders with a difference in gubernatorial election cycles consistent with manipulation state and local government employment per capita are higher leading up to elections afterwards employment abruptly returns to normal political and spatial heterogeneities are investigated including by election competitiveness term limits incumbent party affiliation and ideological alignment between the incumbent and the state legislature or local citizens differences across types of government employment and private sector employment are also explored

democracy and growth in africa implications of increasing electoral competitiveness abstract estimating a 1975 2004 decadal panel data in an augmented production function framework the paper finds that indexes of electoral competitiveness exhibit u shape relationships with gdp growth implying quite different intermediate and advanced level effects of reforms in africa

electoral cycles and budgetary growth in veterans benefit programs while many studies have generated negative findings regarding the general existence of electoral cycles in economic phenomena we have found an apparently robust electoral cycle in veterans benefits this pattern was found between 1961 and 1978 but has disappeared since then we use this case to investigate the possibility that electoral cycles might contribute to the growth of government spending using two different methods of inference we find no strong basis to conclude that such cycles cause increasing public sector growth

a positive theory of discretionary policy the cost of democratic government and the benefits of a constitution we offer an explanation of government s preference for discretionary policy action the main elements are asymmetric information and the ability and desire of governments to maximize reelection prospects discretionary policy imposes a social cost we show that the cost is eliminated if all voters have the same information as the government an optimal state contingent policy rule that precommits government through a constitution eliminates the cost by removing government s opportunities to exploit its informational advantage rules of this kind and constitutional restrictions are difficult to enforce in the presence of uncertainty and different information available to government and the public

preferences for domestic fuel analysis with socio economic factors and rankings in kolkata india abstract the choice of domestic fuel is a matter of great concern for households and policy makers in india this paper investigates the demand for domestic fuels when households face four choices fuelwood coal kerosene and lpg the study is based on a survey of 500 households in kolkata india the demand estimates are conducted using a two stage process where the first stage investigates choice and the second the quantity used determinants of fuel demand are identified and their relative importance shown extending the study the paper also analyses the choice of the main cooking fuel in terms of the households stated rankings of six fuels for five attributes the policy discussion indicates that subsidies have less potential to reduce polluting fuels such as coal and fuelwood due to weak cross price elasticities while increased availability of lpg and potentially also increased awareness of indoor air pollution have greater prospect

does electoral accountability affect economic policy choices evidence from gubernatorial term limits this paper analyzes the behavior of u s governors from 1950 to 1986 to investigate a reputation building model of political behavior we argue that differences in the behavior of governors who face a binding term limit and those who are able to run again provides a source of variation in discount rates that can be used to test a political agency model we find evidence that taxes spending and other policy instruments respond to a binding term limit if a democrat is in office the result is a fiscal cycle in term limit states which lowers state income when the term limit binds

the keynesian and political determinants of unbalanced budgets u s fiscal policy from eisenhower to reagan the political business cycle proposition that politicians manipulate fiscal policy for political advantage is largely untested more often than not such manipulation is only assumed to occur on the basis of observed movements in inflation and unemployment and the few direct tests of the manipulation hypothesis are characterized by limited consideration of the full possibilities for political influence inadequate control for nonpolitical stabilization policy and inconsistent results this paper constructs several models of political fiscal policy incorporates them into a simple model of keynesian stabilization policy and tests the combined models using u s budget surplus deficit data from fy54 to fy83 the results provide little support for either the electoral motivation or partisan differences interpretations of the political business cycle the implications of these findings for the political business cycle literature long term economic management and deficit directed proposals for institutional reform are discussed

the african political business cycle varieties of experience abstractwe seek to understand both the incidence and the impact of the african political business cycle in the light of a literature which has argued that with major extensions of democracy since the 1990s the cycle has both become more intense and has made african political systems more fragile with the help of country case studies we argue first that the african political business cycle is not homogeneous and occurs relatively infrequently in so called dominant party systems where a pre election stimulus confers little political advantage secondly we show that in those countries where a political cycle does occur it does not necessarily cause institutional damage whether it does or not depends not so much on whether there is an electoral cycle as on whether this cycle calms or exacerbates fears of an unjust allocation of resources in other words the composition of the pre election stimulus in terms of its allocation between different categories of voter is as important as its size

divided government fiscal institutions and budget deficits evidence from the states does partisan control of american state government have systematic effects on state spending and taxing levels does divided control affect the government s ability to make hard decisions do institutional rules like legal deficit carryover restrictions matter using a formal model of fiscal policy to guide empirical analysis of data covering the american states from 1968 to 1987 we conclude that 1 aggregate state budget totals are driven by different factors under democrats and republicans the net result being that democrats target spending and taxes to higher shares of state level personal income 2 divided government is less able to react to revenue shocks that lead to budget deficits particularly where different parties control each chamber of the legislature and 3 unified party governments with restricted ability to carry deficits into the next fiscal year outside the south have sharper reactions to negative revenue shocks than those without restrictions

the political process and the use of debt financing by state governments empirical evidence offered in this study suggests that decisions by state government officials to effect debt financed spending depend in part on the state s gubernatorial election cycle more specifically the results reveal relative increases in state debt issues in anticipation of elections and furthermore they reveal that such increases are more significant for states characterized by high interparty political competition while theoretical limitations preclude a definitive explanation for these results the evidence is consistent with a view of state political markets where incumbent parties manipulate public policy so as to enhance the probability of success in pending elections this insight is significant in that it suggests a relationship between public policy decisions and election cycles in a context heretofore unexplored

resource windfalls and public debt a political economy perspective abstract can natural resource windfalls increase public debt in democracies adopting a political economy perspective we show that the answer is in the affirmative resource windfalls increase both the government s income and wealth the former mitigates the need to borrow whereas the latter encourages further borrowing as it improves its terms implying an ambiguous pure effect of resource windfalls on debt re election considerations shorten political time horizons and give rise to political myopia we show that higher political myopia induced by more stringent institutional re election restrictions magnifies the wealth effect turning positive the effect of resource windfalls on debt we test the model s predictions using a panel of u s states over the period 1963 2007 our identification strategy rests on constitutionally entrenched differences in gubernatorial term limits that provide plausibly exogenous variation in re election prospects and geographically based cross state differences in natural endowments our baseline estimates indicate that a resource windfall of 1 induces an increase of approximately 20 in the public debt of states with more stringent re election restrictions

reassessing the energy ladder household energy use in maun botswana abstract in the context of sub saharan africa s rapid urbanization improved insight into urban energy use is increasingly important based on the predictions of energy transition theory a regional shift from biomass to modern fuels has long been expected to occur in tandem with urban growth however trends observed in the region s towns and cities have often not followed such patterns and fuelwood continues to be important in most areas this paper examines the practical relevance of transition theory using a recent case study conducted by the authors in maun botswana and results previously reported in the literature it finds that despite the long term link between socio economic development and increased modern fuel consumption at the national scale the notion of transition does not accurately reflect ongoing energy use patterns at lower levels of aggregation this is chiefly because its model of household fuel switching largely dismisses the importance of active and strategic decision making by urban consumers and their responsiveness to structural factors such as relative fuel prices as the botswana case illustrates this weakness can significantly distort expectations and policies around urban fuelwood use

do state balanced budget requirements matter testing two explanatory frameworks balanced budget requirements bbrs affect all aspects of financial operations previous studies relied on characterizations that highlight a constitutional statutory distinction hou and smith public budgeting finance 26 3 22 45 2006 instead propose a political technical construct this article uses probit estimation six measures of balance and long panels to test which framework offers more explanatory power the findings suggest that bbrs matter to varying degrees technical requirements exert bigger effects than political ones the effects are more obvious on narrower than broader measures of balance and in the later phases of the budget cycle and the political technical construct offers more explanatory power than the constitutional statutory distinction

equilibrium political budget cycles political business cycle theories generally rely on nominal rigidities and voter myopia this paper offers an equilibrium theory that preserves some basic insights from earlier models though with significant refinements the political budget cycle emphasized here is in fiscal policy rather than output and inflation it arises via a multidimensional signal process one can consider the welfare implications of proposals to mitigate the cycle and the effects of altering the electoral structure copyright 1990 by american economic association

a theory of political cycles abstract we study how the proximity of elections affects policy choices in a model in which policymakers want to improve their reputation to increase their reelection chances policymakers equilibrium decisions depend on both their reputation and the proximity of the next election typically incentives to influence election results are stronger closer to the election for a given reputation level as argued in the political cycles literature and these political cycles are less important when the policymaker s reputation is better our analysis sheds light on other agency relationships in which part of the compensation is decided upon infrequently

a positive theory of fiscal deficits and government debt this paper considers an economy in which policymakers with different preferences alternate in office as a result of elections government debt is used strategically by each policymaker to influence the choices of his successors if different policymakers disagree about the desired composition of government spending between two public goods the economy exhibits a deficits bias that is debt accumulation is higher than it would be with a social planner the equilibrium level of debt is larger the larger is the degree of polarization between alternating governments and the less likely it is that the current government will be re elected

political opportunism and countercyclical fiscal policy in election year recessions political budget cycles pbcs have been well documented in the literature albeit not for all circumstances however no work has been done on the impact of economic growth on the magnitude of pbcs the theoretical model argues that a government has an incentive to increase fiscal manipulations when a recession is expected to hit and curtail re election chances this amounts to countercyclical policy for opportunistic rather than keynesian motives very robust evidence for this behaviour is found in portuguese municipalities in election years budget deficits go up even more and significantly so when a recession is expected

the effectiveness of aid on savings and investment in sub saharan africa do volatility and institutional quality matter abstractthe effectiveness of aid is somewhat subject to its volatility this study investigates the impact of aid volatility especially on savings and investment with a particular focus on the role of institutional quality in 45 sub saharan african ssa countries over the period from 1990 to 2013 we used the generalized method of moments gmm technique combined with a measure of volatility namely an averaged data method involving six 4 year sub periods our results suggest that while aid is positively associated with savings and investment its volatility is harmful to savings and investment however when higher quality institutions exist the volatility of aid has a less negative impact on savings and investment the policy implications are diverse first donors and ssa aid dependent countries need to take into account the diversity of shocks to which aid can respond in mitigating its unpredictability secondly ssa countries should be encouraged to establish the conditions for better quality inst

voting suffrage and the political budget cycle evidence from the london metropolitan boroughs 1902 1937 we study the opportunistic political budget cycle in the london metropolitan boroughs between 1902 and 1937 under two different suffrage regimes taxpayer suffrage 1902 1914 and universal suffrage 1921 1937 we argue and find supporting evidence that the political budget cycle operates differently under the two types of suffrage taxpayer suffrage where the right to vote and the obligation to pay local taxes are linked encourages demands for retrenchment and the political budget cycle manifests itself in election year tax cuts and savings on administration costs universal suffrage where all adult residents can vote irrespective of their taxpayer status creates demands for productive public services and the political budget cycle manifests itself in election year hikes in capital spending and a reduction in current spending

richer and healthier but not greener choices concerning household energy use in india india is among the world lowest per capita greenhouse gas ghg emitters but rapid increases are expected at the same time world health organization who estimates show that 424 000 die prematurely in indian households each year from air pollution exposure due to solid fuel use we analyze ghg emissions and health through three policy scenarios for household energy using projections for population income and urbanization in policy scenarios called business as usual bau improved health and green future projected per capita household ghg emissions in 2026 increase by 169 164 and 139 respectively compared to 2001 whereas household mortality rates decrease by 45 67 and 45 respectively due to income growth and urbanization an increase in ghg emissions is likely inevitable but can be slowed for health in contrast improvements are expected and can be expanded

the political determinants of fiscal policies in the states of india an empirical investigation abstract using data from the 14 major states of india we investigate whether state governments fiscal policy choices are tempered by political considerations our principal findings are twofold first we show that certain fiscal policies experience electoral cycles state governments raise less commodity tax revenue spend less on the current account and incur larger capital account developmental expenditures in election years than in all other years second we show that coalition state governments raise less own non tax revenues and spend less on the current account than state governments that are more cohesive in composition in sum the dispersion of political power affects government size

political business cycles democratization and economic reform the case of africa abstract this paper presents cross country evidence that political business cycles are alive and well in the nascent democracies of the developing world africa provides fertile ground for the study of political business cycles this paper uncovers systematic electorally timed interventions in five monetary and four fiscal policy variables in a panel of african countries these findings are consistent with the predictions of rational opportunistic political business cycle theory if africa s increasingly frequent elections are associated with reversals of fiscal and monetary policy reform there is a potential conflict between political and economic reform

testing the rationality of state revenue forecasts recent revenue shortfalls in several states focus attention on the question of whether states do a good job of forecasting revenues in modem economics forecasts are eval uated on the basis of whether or not they are rational do the forecasts optimally incorporate all available information this paper develops a method for testing the rationality of state revenue forecasts and applies it to the analysis of data from new jersey massachusetts and maryland one of our main findings is that in all three states the forecasts of own revenues are systematically biased downward tn 1985 the 50 states raised 349 billion in revenues from their own sources and received 84 billion in grants from the federal government u s bureau of the census 1987 p 266 state governments are clearly important players in the u s system of public finance and the efficiency with which they conduct their financial affairs has an important impact on consumer welfare one important determinant of a state s ability to con duct reasonable fiscal policies is the quality of its revenue forecasts sensible deliberations about ex penditures cannot be made in the absence of good forecasts indeed in the presence of con stitutional or statutory provisions for balanced budgets unanticipated changes in revenues can wreak havoc not only on proposals that are sched uled for funding but on plans that have already been put into effect as well in recent months two powerful governors michael dukakis of massachusetts and mario cuomo of new york have suffered major politi cal embarrassments because actual revenues fell substantially short of the predictions in their re spective states such episodes focus attention on the question of whether states do a good job of forecasting revenues in modem economics fore casts are evaluated on the basis of whether or not they are rational do the forecasts optimally incorporate all information that is available at the time they are made although there is a large literature on state revenue forecasting methods that literature focuses mostly on state budgetary institutions forecasts themselves are evaluated only in an informal fashion 1 although the theory and econometric methods of rational expectations have been used to evaluate forecasts made by households and businesses 2 these powerful tools have not been applied to state government fore casts this paper applies these methods to the problem of state revenue forecasting and as an example uses them to analyze data from new jersey massachusetts and maryland the results cast light not only on the question of rationality per se but on issues such as the impact of political factors on forecasts section ii presents the conceptual framework for testing rational expectations the relevant in stitutional issues and data are described in section iii the results are discussed in section iv we find that in all three states forecasts of own rev enues are systematically biased downward section v concludes with a summary

explaining the duration of exchange rate pegs abstract this paper is an empirical investigation of the duration of exchange rate pegs in 16 latin american countries and jamaica we identify factors that influence peg duration using logit analysis the real exchange rate and the level of international liquidity are significant determinants of the monthly likelihood of devaluation structural variables such as the openness of an economy and its geographical trade concentration and political variables such as changes in the executive also significantly affect the likelihood of a devaluation there is some evidence that the likelihood of a devaluation first rises and subsequently declines during the first year of a peg

model projections for household energy use in india energy use in developing countries is heterogeneous across households present day global energy models are mostly too aggregate to account for this heterogeneity here a bottom up model for residential energy use that starts from key dynamic concepts on energy use in developing countries is presented and applied to india energy use and fuel choice is determined for five end use functions cooking water heating space heating lighting and appliances and for five different income quintiles in rural and urban areas the paper specifically explores the consequences of different assumptions for income distribution and rural electrification on residential sector energy use and co2 emissions finding that results are clearly sensitive to variations in these parameters as a result of population and economic growth total indian residential energy use is expected to increase by around 65 75 in 2050 compared to 2005 but residential carbon emissions may increase by up to 9 10 times the 2005 level while a more equal income distribution and rural electrification enhance the transition to commercial fuels and reduce poverty there is a trade off in terms of higher co2 emissions via increased electricity use

political parties and the business cycle in the united states 1948 1984 this paper tests the existence and the extent of a politically induced business cycle in the u s in the post world war ii period the cycle described in this paper is different from the traditional political business cycle of nordhaus it is based on a systematic difference between the monetary policies of the two parties in a model with labor contracts from an explicit optimization problem we derive a system of equations for output and money growth then we successfully test the non linear restriction imposed by the theory on the parameters of the system of equations we cannot reject the hypothesis that money growth has been systematically different under the two types of administration and that this difference contributes to explain output fluctuations

transparency political polarization and political budget cycles in oecd countries we investigate the effects of fiscal transparency and political polarization on the prevalence of electoral cycles in fiscal balance while some 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 of many advanced industrialized economies using a sample of 19 oecd countries in the 1990s 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 politically more polarized countries

political stabilization cycles in high inflation economies abstract high inflation economies often exhibit stop go cycles of inflation rather than smooth inflationary processes this paper relates these stop go episodes of inflation to a political cycle the government can try to repress inflation until after the elections in order to increase the chances of being reelected this is modeled as a two period game of incomplete information where voters try to pick the most competent government and inflation which signals lack of competency can be lowered by the government in the short run through foreign debt accumulation several stabilization episodes such as the primavera plan in argentina and the cruzado plan in brazil are used to motivate the model

electoral competition in the american states electoral competition is a concept that has played a central role in much of the state politics literature one commonly used indicator of competition in the states is the ranney index we offer an alternative indicator of competition one based on district level outcomes of state legislative elections after evaluating both indicators in terms of validity and reliability the analysis suggests that the district level indicator is both empirically and intuitively superior as a measure of electoral competition the implications of this finding are discussed

property tax revaluation and tax levy growth abstract jurisdiction wide property revaluation like many administrative reforms may have unintended consequences this paper examines one such potential consequence by pooling 18 year time series for each of 39 massachusetts cities 17 of which revalued and 270 massachusetts towns 202 of which revalued we examine the hypothesis that politicians take advantage of the confusion generated by revaluation and raise property taxes by more than they otherwise would have we observe such a response in cities but not in towns and attribute this difference to differences in their governmental structures

explaining african economic performance africa has had slow growth and a massive exodus of capital in many respects it has been the most capital hostile region we review and interpret the aggregate level and microeconomic literatures to identify the key explanations for this performance there is a reasonable correspondence of the two sets of evidence pointing to four factors as being important these are a lack of openness to international trade a high risk environment a low level of social capital and poor infrastructure these problems are to a substantial extent attributable to government behaviour and the paper includes a review of the political economy literature which addresses that behaviour

incumbent behavior vote seeking tax setting and yardstick competition this paper develops a model of the political economy of tax setting in a multijurisdictional world where voters choices and incumbent behavior are determined simultaneously voters are assumed to make comparisons between jurisdictions to overcome political agency problems this forces incumbents into a yardstick competition in which they care about what other incumbents are doing we provide a theoretical framework and empirical evidence using u s state data from 1960 to 1988 the results are encouraging to the view that vote seeking and tax setting are tied together through the nexus of yardstick competition

political budget cycles and divided government abstractpolitical budget cycles and divided government regional studies this study empirically examines the effect of divided governments on the existence of political budget cycles it uses a setting at the german municipality level where divided governments occur frequently and can be clearly disentangled from the underlying political system in this setting the executive does not have full discretion over expenditures and tax rates and needs support from the legislative to manipulate policy before executive elections the study shows that political budget cycles in expenditures and tax rates are more likely when the same party controls executive and legislative under divided government policy manipulation is significantly smaller

eroi of different fuels and the implications for society abstract all forms of economic production and exchange involve the use of energy directly and in the transformation of materials until recently cheap and seemingly limitless fossil energy has allowed most of society to ignore the importance of contributions to the economic process from the biophysical world as well as the potential limits to growth this paper centers on assessing the energy costs of modern day society and its relation to gdp our most important focus is the characteristics of our major energy sources including each fuel s energy return on investment eroi the eroi of our most important fuels is declining and most renewable and non conventional energy alternatives have substantially lower eroi values than traditional conventional fossil fuels at the societal level declining eroi means that an increasing proportion of energy output and economic activity must be diverted to attaining the energy needed to run an economy leaving less discretionary funds available for non essential purchases which often drive growth the declining eroi of traditional fossil fuel energy sources and the effect of that on the world economy are likely to result in a myriad of consequences most of which will not be perceived as good

the determinants of off budget activity of state and local governments the primary finding of this paper is that the off budget activity of the public sector is significantly and positively related to on budget activity by state and local governments we suggest the following policy implications one there appears to be evidence that the composition of total government activity is related to the relative costs of the alternative avenues of providing governmental activity future research into determining the nature of the relative cost differences may be one useful means of understanding both the composition of government activity as well as its total size two our ability to measure the true size of public sector participation in the economy must go well beyond our attempt here while we have presented information on one of the important hidden elements of public sector participation we are still a long way from effectively incorporating similar data on legislation regulations and so forth into our empirical tests further research into these issues is clearly warranted

fiscal capacity and the quality of government in sub saharan africa summary historical evidence from the industrialized world suggests that the expansion of the modern state s capacity to tax eventually led to more democratic and less corrupt governments using a dataset that covers 31 sub saharan african countries over the 1990 2005 period we study whether the positive effect of fiscal capacity on the quality of government prevails in contemporaneous sub saharan africa as well the results provide consistent evidence that within sub saharan africa fiscal capacity decreases corruption and increases democracy

the energy metabolism of countries energy efficiency and use in the period that followed the global financial crisis this paper discusses how the deceleration of economic growth that followed the financial crisis of 2008 influenced the energy efficiency allocation and use of 18 european countries by using a multi scale integrated analysis of societal and ecosystem metabolism musiasem the relationships between energy requirements economic trends and population are investigated for the years 2008 and 2015 the analyses are performed for the entire society level n for the household and the paid sectors level n 1 and for the agricultural the industrial and the service activities level n 2 results show that two main groups of countries performed the largest energy reductions namely the country most affected by the global financial crisis such as greece romania and spain where the total energy throughput decreased by 19 6 15 8 and 12 1 respectively and the countries such as ireland and united kingdom that experienced the largest energy intensity reductions 38 7 and 19 2 together with the highest gdp increases 44 8 and 10 2 by providing an overview of the relationships existing between socio economic and energy variables this paper contributes to the debate around growth and efficiency and can support the design of policies oriented to promote the achievement of a more sustainable and competitive economy

bohn s test of fiscal sustainability of the american state governments the dramatic fall in state revenues during the great recession and the resultant large budget deficits accentuated concerns about state fiscal sustainability i employ a model based approach proposed by bohn 1998 to test for sustainability in this approach a positive and significant reaction of the ratio of primary surplus ratio s to lagged debt constitutes a sufficient condition for sustainability based on a panel of 48 contiguous states 1961 2008 and several model specifications i find robust evidence in favor of sustainability further analysis suggests that the adjustment of the components of s to debt is asymmetric with the revenue side bearing a heavier burden than the spending side the response of s is also found to be asymmetric with respect to the level of debt finally the magnitude of the response is larger in states with a higher degree of fiscal stringency in general and own revenue and no deficit carryover provisions in particular

disentangling patterns of state debt financing we examine the determinants of change in state government indebtedness from 1961 through 1989 using a pooled time series cross sectional analysis the analysis reveals that debt is primarily a function of economic conditions reflecting both the need to borrow and the capacity of states to repay debt however political factors such as culture partisan competition and electoral cycles also affect state debt we also find very weak evidence that tax and expenditure limitations ironically may increase state indebtedness while constitutional debt limitations have no effect upon slowing the growth of state debt

seeing the forest through the trees a meta analysis of political budget cycles despite a vast number of articles the political budget cycle literature contains many conflicting theories and empirical results i conduct the first ever meta analysis of this literature in order to establish whether a link between elections and government budgets exists using data on 1198 estimates across 88 studies published between 2000 and 2015 i find evidence of a statistically significant yet substantively small increase in government expenditures and public debt around elections and reductions in revenues and fiscal balance using meta regression analysis combined with bayesian model averaging i find support for some of the context conditional theories in the literature although the findings of political budget cycles are robust to publication bias as well as some of the methodological and study specific choices authors are forced to make they also shed light on how certain decisions may affect a study s findings this has implications for current and future research on political budget cycles

political budget cycles and the civil service evidence from highway spending in us states abstract we study political budget cycles in infrastructure spending that are conditional on bureaucratic organization bureaucrats can facilitate or hinder politicians ability to engage in voter friendly spending around elections to test this idea we use civil service reforms undertaken by us states in the second half of the 20th century to study political budget cycles in highway spending under civil service and patronage we find that under patronage highway spending is 12 higher in election years and 9 higher in the year before an election by contrast under civil service highway spending is essentially smooth over the electoral cycle these findings provide a novel way through which civil service rules can stabilize government activity

tax innovation in the states capitalizing on political opportunity this paper assesses the factors that prompt states to adopt taxes during the twentieth century we test five explanations of state tax innovation derived from the literature economic development fiscal health election cycle party control and regional diffusion using event history analysis a pooled cross sectional time series technique while little support is found for the economic development and party control explanations our empirical results are highly consistent with a political opportunity explanation of state tax adoptions 1 the presence of a long time until the next election 2 the existence of a fiscal crisis and 3 the presence of neighboring states that have previously adopted a tax all create opportunities for politicians to shield themselves from the political costs of supporting a tax increase and are all shown by empirical analysis to increase the probability of a tax adoption this empirical evidence is consistent across different tax instruments and different periods of analysis throughout the twentieth century

democracy and development a theoretical framework a simple framework is set up to discuss the relationship between democracy material welfare and development democracy is regarded both as a good in its own right and as an input in the production of material welfare the optimum level of democracy is then related to the level of development at the optimum point the marginal cost of democracy in terms of foregone output is positive and growth is a decreasing function of the level of democracy deviations from the optimum path are described as either repressive or populist democratization is not unambiguously an optimal response to exogenous shocks

an intergenerational transfer model of state debt financing as federal budget deficits and the overall national debt have risen in recent years scholarly attention to the causes and consequences of federal indebtedness has also increased much of that research has focused upon the intergenerational distributive effects of relying upon debt as opposed to tax financing considerably less attention has been directed toward debt financing by the american states despite the fact that such borrowing has increased steadily over the last thirty years though not with the dramatic suddenness that characterizes increases in federal borrowing regens and lauth 1988 this paper examines debt financing at the state level as a policy choice with important intergenerational consequences the analysis assumes that debt financing is the result of political decisions based upon a calculation of the economic interests of different demographic groups within each state elected officials are believed to weigh those interests in the light of their states electoral and legal environments borrowing from an argument by alex cukierman and allan meltzer this paper examines the proposition that a state s long term debt financing is likely to be sizeable in absolute per capita terms and relative to tax revenues when two conditions are met 1 the state has a large elderly population and 2 recent economic growth trends indicate that future generations of state taxpayers may have an easier time paying off currently incurred debt than current taxpayers would have paying off government obligations on a pay as you go basis under these conditions a large portion of a state s electorate is likely to be bequest constrained meaning that they are not willing to donate an inheritance of fully financed government facilities and services to successive generations instead they are willing to borrow from their heirs by forcing future taxpayers to pay the costs of current consumption of governmental benefits

the costs and benefits of balanced budget rules lessons from a political economy model of fiscal policy this paper analyzes the impact of a balanced budget rule that requires that legislators do not run deficits in the political economy model of battaglini and coate 2008 the main finding is that the rule leads to a gradual reduction in the level of public debt legislators reduce debt in periods when the demand for public goods is relatively low they do so because the rule by restricting future fiscal policies raises the expected costs of carrying debt whether the rule increases citizen welfare depends on a comparison of the benefits of a lower debt burden with the costs of greater volatility in taxes and less responsive public good provision a quantitative version of the model is developed in which costs and benefits can be evaluated a welfare loss results if the debt level when the rule is imposed lies in the support of the long run distribution associated with the unconstrained equilibrium

overlapping political budget cycles we advance the literature on political budget cycles by testing for cycles in expenditures for elections to the legislative and the executive branches using municipal data we identify cycles independently for the two branches evaluate the effects of overlaps and account for general year effects we find sizable effects on expenditures before legislative elections and even larger effects before joint elections to the legislature and the office of mayor in the case of coincident elections we show that it is important whether the incumbent chief executive seeks reelection to account for the potential endogeneity of that decision we apply an iv approach using age and pension eligibility rules

urban household energy use in india efficiency and policy implications biomass based fuels are being steadily replaced with modern fossil fuels and electricity in cities of developing countries the latter energy sources are more convenient and efficient to use and produce less local pollutants this fuel transition has accompanied economic growth in many cities empirical data to substantiate these generalizations are being gathered by researchers we report on a recent survey of household energy use in the city of hyderabad india the survey reveals that the underlying fuel transition is consistent with that in other developing country cities government policy however has favored the rich because of the inequities in fuel and equipment availability among income groups we report the major findings of the survey in context of other data for india and suggest policy changes to redress these inequities

how do mncs vote in developing country elections research on multinational corporations mncs and host government political risk in developing countries has largely ignored local electoral politics economic policies and the mnc investment ince

political cycles in a developing economy effect of elections in indian states the author studies the effect of state legislative assembly elections on the policies of state governments in 14 major states of india from 1960 to 1996 she identifies the effect of the timing of elections using an instrument for the electoral cycle that distinguishes between constitutionally scheduled elections and midterm polls she contrasts two levers of policy manipulation fiscal policy and public service delivery to distinguish between alternative models of political cycles the predictions of three models are tested 1 populist cycles to woo uninformed and myopic voters 2 signaling models with asymmetric information 3 a moral hazard model with high discounting by political agents the empirical results for fiscal policy show that election years have a negative effect on some commodity taxes a positive effect on investment spending but no effect on deficits primarily because consumption spending is reduced with regard to public service delivery elections have a positive and large effect on road construction by state public works departments strikingly the fiscal effects are much smaller than the effect on roads the author argues that the pattern of evidence is inconsistent with the predictions of models of voter myopia and asymmetric information she explores an alternative moral hazard model in which the cycle is generated by high political discounting and career concerns persuade politicians to exert greater effort in election years on the management of public works

the subnational politics of economic adjustment provincial politics and fiscal performance in argentina existing research has failed to address the impact of subnational politics on economic adjustment this article attempts to fill this gap by outlining theoretical reasons for anticipating policy divergences across levels of government and by offering three hypotheses to account for variation at the subnational level the authors explore these ideas on the basis of the argentine experience the study traces the impact of subnational policy on argentine economic adjustment and tests hypotheses about subnational policy variation on the basis of provincial fiscal data the authors findings underline the importance of subnational policy choice for national performance and suggest a revised understanding of the role of political competition in the economic adjustment process the authors find considerable evidence that interactions between party competition and the structure of the public sector shape provincial fiscal performance and thereby condition the capacity for economic adjustment at the national level

multi scale integrated assessment of second generation bioethanol for transport sector in the campania region abstract current narrative on biofuels is backed up by a large number of studies published in the scientific literature that address second generation bioethanol only through a single topic approach nonetheless in the vast majority of cases transition to this energy carrier is evaluated as a generally promising technology this paper presents a first attempt in proposing an integrated evaluation of the actual benefits expected from bioethanol in the transport sector by applying the multi scale integrated analysis of societal and ecosystem metabolism musiasem to the prospective realization of a local system of bio refinery in campania region southern italy musiasem is a multi criteria analysis enabling to deal with the complexity of a territorial energy system since the unavoidable intrinsic uncertainty the study does not focus on predictions but adopts a strategy of quantitative story telling about some relevant results underlying the limits and critical issues about the energy converter fabric the economic profitability environmental constraints and the questionable concept of marginal land the findings suggest concluding toward falsification of key points in the current narrative i the system is not an efficient solar energy converter ii it fails to realize many of the expectations for a renewable energy carrier producer iii the contribution to decarbonization strategies is not as high as desired and other environmental impacts could not be neglected iv the very large land requirement is hardly compatible with conversion of truly marginal land in campania region v compared to alternate land uses it does not seem an actually promising strategy to regain value from rural economy

making rules credible divided government and political budget cycles political budget cycles pbcs can result from the credibility problems office motivated incumbents face under asymmetric information due to the temptation to manipulate fiscal policy to increase their electoral chances we analyze the role of rules that limit public debt because borrowing is a necessary condition for aggregate pbcs since the legislature must typically authorize new debt divided government can make these fiscal rules credible commitment is undermined by either unified government or imperfect compliance with the budget law which can help explain why pbcs are stronger in developing countries and in new democracies when divided government affects efficiency voters must trade off electoral distortions and government competence