Roads or Schools? Political Budget Cycles with different types of voters.

Lopez Uribe, Maria del Pilar (2013): Roads or Schools? Political Budget Cycles with different types of voters.

Abstract

Using a new Colombian data set (1830-2000), we analyze how changes in the electoral legislation with regard to the characteristics of voters (in terms of education and income levels) has affected fiscal policy in electoral times. In line with economic theory, we show that after the law was reformed in 1936 the composition of the expenditure shifted towards social spending (like education, health, and welfare benefits) but there was decreased spending on infrastructure and investment projects (like roads). Consistent with the literature, we also find: 1.The timing and the size of the political budget cycles changed after 1936 and 2.After 1936 there was a shift in the funding mechanisms from indirect tax revenues to more debt.

• Item Type: MPRA Paper
• Language: English
• Keywords: Political Budget Cycles, Expenditure composition, Revenue composition, Elections, Colombia
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D78 - Positive Analysis of Policy Formulation and Implementation; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; H - Public Economics > H6 - National Budget, Deficit, and Debt > H61 - Budget ; Budget Systems

References

Akhmedov, A and Zhuravskaya, E (2004) "Opportunistic Political Cycles: test in a young democracy setting", Working Paper, Center for Economic and Financial Research.

Ames, B (1987) "The politics of Public Spending in Latin America", American Journal of Political Science 21 (1): 149-176.

Amorim, O and Borsani, H (2004) "Presidents and Cabinets: The Political Determinants of Fiscal Behavior in Latin America", Studies in Comparative International Development 39 (1): 3-27.

Barberia, L and Avelino, G (2011) "Do Political Budget Cycles differ in Latin American Democracies?" Economia, Spring 11(2): 101-145.

Blais, A and Nadeu, R (1992) "The electoral budget cycle", Public Choice, 74: 389-403.

Block, S.A (2002) "The political business cycles, democratization, and economic reform: the case of Africa", Journal of Development Economics, 67: 205-228.

Botero, S (2006) "La reforma constitucional de 1936, el Estado y las politicas sociales en Colombia", Anuario Colombiano de Historia Social y de la Cultura, N. 33: 85-109.

Brender, A (2005) "The effect of fiscal performance on local government election results in Israel: 1989-1998", Journal of Public Economics, 87: 2187-2205.

Brender, A and Drazen, A (2005) "Political Budget cycles in new versus established democracies", Journal of Monetary Economics, 52: 1271-1295.

Bushnell, D (1993) The Making of Modern Colombia: A Nation in spite of itself, Berkeley, Univ. of California Press.

Camacho Roldán, S (1871), Memoria que el Secretario de Hacienda i Fomento presenta al Presidente de la República sobre el curso que han tenido los negocios fiscales de Colombia, en el año económico de 1869 a 1870, Imprenta de Gaitán, Bogotá.

Deas, M (1993) Del Poder y la Gramatica, Tercer Mundo Editores, Bogota.

Drazen, A (2001) "The Political Business Cycle after 25 years", NBER Macroeconomic Annual, Vol. 15.

Drazen, A and Eslava, M (2010) "Electoral Manipulation via voter-friendly spending: Theory and Evidence, Journal of Development Economics, 92(1): 39-52.

Eslava, M (2006) "The political economy of Fiscal Policy: Survey", IDB Working paper.

España, G (1985), La guerra civil de 1885. Núñez y la derrota del radicalismo, El áncora editores, Bogotá.

Faal, E (2007) "Political Budget Cycles in Papua New Guinea", IMF Working Paper.

Galindo, A. (1874), Historia Económica y Estadística de la Hacienda Nacional desde la Colonia hasta nuestros días, Imprenta de Nicolás Pontón y Compañía, Bogotá.

Gamez, C and Ibarra-Yunez, A (2009) "El ciclo politico oportunista y el gasto de los estados mexicanos", Gestion y Politica Publica, XVIII (1): 39-65.

Gonzalez, M.A (2002) "Do changes in Democracy affect the political Budget Cycle? Evidence from Mexico", Review of Development Economics, 6 (2) 2004-2024.

Gonzalez, F and Calderon, V (2002) "Las reformas tributarias en Colombia durante el siglo XX", Direccion de estudios economicos, Departamento Nacional de Planeacion.

GRECO, (2002), El crecimiento economico colombiano en el siglo XX, Banco de la Republica and Fondo de Cultura Economica, Bogota.

Jordan Florez, F. (2000). Antología del pensamiento y programas del partido liberal 1820-2000, Partido Liberal Colombiano, Bogotá.

Junguito, R (2009) "Finanzas Públicas Siglo XIX", mimeo, Bogotá.

Kalmanovitz, S and López, E (2009) Las cuentas nacionales de Colombia en el siglo XIX, Universidad Jorge Tadeo Lozano, Bogotá.

Kneebone, R and McKenzie, K (2001) "Electoral and Partisan Cycles in Fiscal Policy: an examination of Canadian Provinces", International Tax and Public Finance, 8:753-774.

Larrain, F and Assael, P (1997) "El ciclo politico economico en Chile en el ultimo medio siglo", Estudios Publicos, 68:197-214.

Laurent, M. (2008) Contrabando en Colombia durante el siglo XIX, Uniandes-CESO, History Department, Bogotá.

Levitt, S.D (1997) "Using electoral cycles in police hiring to estimate the effect of police on crime", American Economic Review, 66(2), 1-19.

López, L.F (1992) Historia de la Hacienda y el Tesoro en Colombia, 1821-1900, Banco de la República, Bogotá.

Lopez-Uribe, M.P and Espinosa, M, "El Camino a la Presidencia", mimeo, Bogota.

Lowly, R, Alt J and Ferree, K (1998) "Political Outcomes and Electoral Accountability in American States", American Political Science Review 92: 759-774.

Medina, L (2003), "Evidencia de ciclo electoral-presupuestario en las provincias argentinas", Working Paper, Universidad del CEMA.

Mejia Acosta, A and Coppedge, M (2001) "Political Determinants of Fiscal Discipline in Latin America, 1979-1998", Paper presented for the International Congress of the Latin American Studies Association, Washington, September 5-8.

Nordhaus, W. (1975) "The Political Business Cycle", Review of Economic Studies, 42: 169-190.

Ocampo, J.A (2007), "Librecambio y Proteccionismo en el siglo XIX" in Crisis mundial, Protección e Industrialización, Editors, Ocampo, J.A y Montenegro, S, Editorial Norma, Bogotá.

Ocampo, J.A (1998), Colombia y la Economía Mundial, 1830-1910, Tercer Mundo Editores, Bogotá.

Pardo, R (2004), La Historia de las Guerras, Ediciones B, Bogotá.

Pérez, A (1942), 25 años de Historia Nacional 1853 a 1878, Editorial Cromos, Bogotá.

Persson, T and Tabellini, G (2003) The economics effects of Constitutions, Munich Lectures in Economics, MIT.

Posada-Carbo, E (1997), "Limits of Power: Elections under the conservative hegemony in Colombia, 1886-1930", Hispanic American Historical Review, 77, 2:245-279.

Remmer, K (1993) "The Political Economy of Elections in Latin America, 1980-1991", American Political Science Review, 87 (2):393-407.

Rogoff, K (1990) "Equilibrium Political Budget Cycles", American Economic Review 80: 21-36

Rogoff, K and Sibert, A (1988) "Elections and Macroeconomics Policy Cycles", Review of Economic Studies, 55(1): 1-16.

Schuknecht, L (1996) "Political Business Cycles and Fiscal Policies in Developing countries", Kyklos, 49 (2): 155-170.

Schuknecht, L (2000) "Fiscal Policies cycles and public expenditure in developing countries", Public Choice, 102: 115-130.

Shi, M and Svensson, J (2002), "Conditional Political Budget Cycles", Centre for Economic Policy Research, Working Paper, N. 3352.

Shi, M and Svensson, J (2003), "Political budget cycles: a review of recent developments", Nordic Journal of Political Economy, 29: 67-76.

Shi, M and Svensson, J (2006) "Political Budget cycles: do they differ across countries and why?" Journal of Public Economics, 90: 1367-1389.

Soto, F (1893) Las constituciones con facultades extraordinarias y los gobernantes irresponsables, s. n, Maracaibo.

Urrutia, M and Arrubla, M (1970) Compendio de Estadísticas Históricas de Colombia, Universidad Nacional de Colombia, Bogotá.

Valencia, A. (1993). Empresarios y políticos en el Estado Soberano del Cauca, 1860-1895. Editorial Facultad de Humanidades Especialización en la Enseñanza de las Ciencias Sociales, Universidad del Valle, Cali.

Valencia, A (1988) Estado Soberano del Cauca, Federalismo y Regeneración, Banco de la República, Bogotá.

Vergara y Vergara, A (1915) Estudio sobre la moneda legal en Colombia, Imprenta de Carteles, Bogotá.