Is There a Political Budget Cycle in Swedish Local Public Finances?
Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
This paper analyses whether local politicians in Sweden rearrange the budget composition in election years in order to increase their chances of being re-elected. Both a static and a dynamic model are estimated using OLS FE, GMM and TSLS on panel data for 284 municipalities for the years 1995-2012. The results shows that politicians increase the spending on infrastructure and employment improving measures, while they decrease the spending on classical welfare services. The results contributes to the theory that political budget cycles takes the form of re-allocations within the budget in developed democracies. According to this theory, the incumbent uses re-allocations to keep the budget balanced. In this way, the incumbent can use targeted election year spending to enhance re-election chances and still avoid being ‘punished’ by voters that are averse to large deficits. This paper finds that the budget posts targeted by incumbents in Swedish municipalities are not the ones that voters consider important, according to election surveys. This suggests that some other mechanism is causing the cycles.
Place, publisher, year, edition, pages
Fiscal Manipulation, Political Budget Cycles, Expenditure Composition, Elections, Sweden
IdentifiersURN: urn:nbn:se:uu:diva-226475OAI: oai:DiVA.org:uu-226475DiVA: diva2:725808
Mörk, Eva, Professor
Waldenström, Daniel, Gästprofessor