# **Appendix A: Data construction and variable description**

## **Data construction**

Our data set of reference is the WEO (October 2016 version) to capture the general government primary expenditures (GGX and GGEI series), gross domestic product, current prices (NGDP series), the GDP deflator (NGDP_D series), and the terms of trade (TT series).<sup>20</sup> We consider the period of reference by Frankel et al. (2013) from 1960-2009, extended to 2016. To select our countries, we apply the following criteria:

1. We first drop every observation with strictly fewer than one million inhabitants, following Alesina et al. (2008). The underlying idea is those tiny countries are exposed to very large shocks, making the comparison with larger countries more difficult.<sup>21</sup>

2. Then, we drop every country with strictly fewer than 16 years of data (over 1960-2016) for general government primary spending and gross domestic product series, still following Alesina et al. (2008). The underlying idea is that we need to observe at least two or three cycles in each country as we study fiscal procyclicality.

3. We drop all the countries which are simultaneously (i) classified as “high income” for the year 2017 by the World Bank (https://datahelpdesk.worldbank.org/knowledgebase/articles/906519 <u>world-bank-country-and-lending-groups); and (ii) were members to the OECD strictly before</u> the fall of the Soviet Union (year 1992). Under this double selection process, we safely remove all established developed countries, and we keep Turkey, high-income non-OECD countries (such as Saudi Arabia or Singapore) and recent OECD members (such as Israel, Mexico, and Slovenia). By keeping these countries in a first step, we are able to capture more variability in our results and eventually to remove them in a second step for robustness checks.

Applying these three criteria leaves us with a sample of 116 developing countries (the Syrian Arab Republic is removed due to the war) over the period 1960-2016. To maximize the number of countries displayed in our descriptive statistics, we focus mainly on the sub-period 2000-2016.<sup>22</sup>

> 20 More details on the variables in Table A.5. We consider the general government primary expenditures, instead of central government, total expenditure and net lending (GCENL series) used by Frankel et al. (2013) as the last one is not available since WEO archives 2009. Accounting for the general government coverage enables us to have comparable spending figures between unitary states and federal states (such as the Democratic Republic of Congo and Nigeria). Accounting for primary spending enables us to account for current performance of administrations, irrespective to the debt service burden.

> 21 To capture the population size, we use the “Population, total” series from the WDI data set (updated February 1, 2017), and removed all observations with a blank in the series. We keep Taiwan, China, which in no longer covered in WDI data set, as the population size is over the threshold of one million inhabitants for the whole period.

> 22 For example, we do not have data on general government primary expenditures available before 2000 for Nigeria. To avoid confusion, we do not attempt to apply the criteria #2, on the sub-period 2000-2016; as recalled by Alesina et al.

> (2008), in general, the larger the cutoff for inclusion is –relative to the time horizon we have-, the stronger the results are.

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