Electoral Budget Cycles in Legislatures

• Published date: 01 November 2013
• Author: Joachim Wehner
• Date: 01 November 2013
• DOI: http://doi.org/10.1111/lsq.12027

JOACHIM WEHNER

London School of Economics

and Political Science

Electoral Budget Cycles

in Legislatures

This article examines electoral cycles in legislative budget decisions. Where local

structures play an important role in candidate selection and election, legislators’ incen-

tives to amend the executivespending proposal can depend on the proximity of elections,

leading to more spendthrift behavior in the run-up to popular votes. However, stringent

budget institutions can counteract this tendency. Using a unique dataset of executive

spending proposals and approved budgets in Sweden, I f‌ind strong empirical support for

these predictions. Future studies of electoral cycles should pay greater attention to

separating the contributions of the legislative and executive stages of the budgetary

process and the conditions that foster electoral cyclicality in legislatures.

The idea that politicians may attempt to manipulate economic per-

formance or f‌iscal policy as they approach elections has been the subject

of much empirical work, often with mixed results.This ar ticle highlights

the role of legislative politics and budget institutions. Most of the existing

literature on electoral cycles in f‌iscal policy does not clearly disentangle

the separate contribution of executive and legislative dynamics. I develop

a framework for thinking about the effect of elections on legislative

spending choices and an empirical strategy to address this gap. In addi-

tion, I test whether budget institutions condition the effect of elections on

legislative spending decisions, in line with calls for more “context-

conditional” work that explores under what circumstances electoral

cycles are most likely to occur (Franzese 2002).

My argument builds on the distributive politics approach

(Weingast, Shepsle, and Johnsen 1981) and is based on the observation

that legislators face tiered career incentives: They f‌irst need to be

reselected and reelected, which depends on pleasing those who have the

power to select and elect candidates; once this has been accomplished,

they have incentives to get appointed to positions of inf‌luence, which

usually depends on pleasing their party’s leadership. Where local struc-

tures play an important role in candidate selection and election, this can

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LEGISLATIVE STUDIES QUARTERLY, XXXVIII, 4, November 2013 545

DOI: 10.1111/lsq.12027

© 2013 The Comparative Legislative Research Center of The University of Iowa

create incentives for legislators to internalize a decreasing share of the

cost of their actions as elections approach. If these incentives are

unchecked, parliamentary changes to the executive budget proposal are

likely to vary systematically around the time of elections, with pre-

election splurges followed by relative discipline after elections. However,

institutional constraints can counteract the temptation for legislators to

go on an election-induced spending spree. I examine these hypotheses

with a unique dataset of changes to executive spending proposals during

their review in the Swedish Riksdag, covering the period since the f‌irst

fully democratic elections in 1921. To preview, I f‌ind systematic evidence

of electoral cycles in these changes, conditional on institutional context,

even when accounting for the possibility of strategic interaction and a

range of other variables. The rigid nature of Sweden’s electoral calendar

suggests that these effects are at least in principle causal.

The article has three main sections. The f‌irst section brief‌ly

sketches some relevant trends in the literature and highlight gaps, fol-

lowed by theoretical background and the hypotheses to be tested. The

second section discusses case selection and reviews the relevantvariables

and data, and the third section contains the empirical investigation. The

conclusion examines generalizability and the wider implications of the

results.

Electoral Proximity and Legislator Incentives

The literature on electoral budget cycles is extensive and has under-

gone a series of ref‌inements. Initially, research focused on the manipu-

lation of economic outcomes by politicians (Nordhaus 1975). Empirical

work has found rather mixed support. For various reasons, politicians

may not be able to directly engineer economic expansions.1However,

they may have more direct control over the budget and may use it to

attempt electoral manipulation (Rogoff and Sibert 1988; Tufte 1978).

More recent is a focus on context conditionality (Franzese 2002). Elec-

toral cycles in f‌iscal policy have been related to the form of government

(Persson and Tabellini 2002), democratic maturity (Brender and Drazen

2005), and budget transparency (Alt and Lassen 2006), while Chang

(2008) shows that electoral systems condition which types of outlays

increase in election years. Using data from the American states, Alt and

Rose (2007) f‌ind that institutional arrangements that strictly enforce

balanced budgets eliminate the f‌iscal effect of elections (see also Rose

2006). The latter argument is largely untested for parliamentary systems.

One exception is the work by Clark and Hallerberg(2000), although their

main focus is the interplay between f‌iscal and monetary policymakers.

546 Joachim Wehner