Political budget cycles at the municipal level in Croatia

Abstract

This paper examines the existence of the political budget cycle (PBC) at the local unit level in Croatia. The research was focused on a sample of 19 county centres, the City of Zagreb and Pula in the period from 2002 to 2011. During that time three parliamentary (in 2003, 2007 and in 2011) and two local elections (in 2005 and in 2009) were held and all the results are calculated at the level of the selected cities. The results do not confirm the existence of opportunistic PBCs, either when the analysis takes in all five elections or when it considers only the parliamentary polls. They do however indicate the restructuring of total expenditures based on second-best strategies and institutional constraints. Analysis of local elections alone indicates the existence of Rogoff’s model of information asymmetry. The paper also presents various theoretical models of the PBC together with a survey of empirical research regarding the existence of PBCs in the developed, transitional and developing countries.

Keywords

• political-budget cycles; elections; dynamic panel data analysis