Economia Aplicada (Jun 2001)
Reeleição e política fiscal: um estudo dos efeitos da reeleição nos gastos públicos
Abstract
The paper analyses the relationship between fiscal policy and reelection opportunities at the level ofsubnational governments. The article first considers fiscal and electoral data from Brazilian states, which suggest that, when an incumbent governor expects to be reelected, she chooses a more responsible fiscal policy. An econometric study confirms the above stylized facts. Finally, the article proposes a theoretic model of government's expenditure decision making in the presence ofmarket discipline incentives. In opposition to the usual literature on political budget cycles, the model suggests that reelection and market discipline may be effective mechanisms to reduce government deficits in an election year, in order to avoid the negative effects on interest rates in the future.
