The political budget cycles in emerging and developing countries

Abstract

Purpose – This paper examines the political budget cycles in emerging and developing countries using a sample of 91 countries from 1992 to 2019. Design/methodology/approach – This paper employs a pooled ordinary least squares (OLS) model with clustered standard errors at the country level. To address endogeneity issues, the authors also employ a two-step system generalized methods of moments model. Findings – The authors find clear evidence of political budget cycles in emerging and developing countries. The authors consistently find that incumbents increase total government spending, particularly in economic affairs, public services and social welfare, in the year before an election and the election year. In contrast, they contract spending in the year after an election. Research limitations/implications – Policymakers should be aware of the political budget cycles during election years. Promoting control of corruption and democracy helps to alleviate the effects of the political budget cycles in emerging and developing countries. Originality/value – The authors are among the first to explore the political budget cycles in emerging and developing countries by focusing on the total government spending and its main compositions, including expenditures on economic affairs, public services and social welfare. Besides, the authors also explore the conditioning effects of control of corruption, political ideology and democracy.

Keywords

• Political budget cycle
• Government expenditure
• Election cycle
• Emerging and developing countries