Shaking rivers and budget cycles : a comprehensive framework
Date
2024-03
Authors
Campabadal, Joaquín
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Heymann, Daniel
Journal Title
Journal ISSN
Volume Title
Publisher
Universidad de San Andrés. Departamento de Economía
Abstract
The 1990s were host to a variety of political economy papers that tried to explain why
and how incumbents would use fiscal resources strategically to get reelected. Under the main
argument, a politician might be inclined to increase spending/reduce taxes when close to an
election to increase their reelection probabilities, even if this goes against their preferences (i.e.
a party increases expenditure even if it’s right-leaning) or if it harms the economy in the long
run (by reducing the stream of resources in the future). Allegedly, this literature - called the
political budget cycle literature - wanted to endow the experiences of the Reagan administration
(among others) with a rationale, especially those near the end of his second term. In this thesis
I will focus on two objectives. First, I will study the US case to try to understand whether
these dynamics are present there, if they are heterogenous across parties and how they are
affected by the likelihood of being reelected. Secondly, I will develop a theoretical framework
in which parties use fiscal variables detrimentally to enhance their chances at reelection, and
explore the interplay between election prospects and the behavior of the incumbent regarding
fiscal variables.
Description
Fil: Campabadal, Joaquín. Universidad de San Andrés. Departamento de Economía; Argentina.