Written by Francesco Stolfi
Political Budget Cycles (PBCs), namely the manipulation of taxation or government spending close to elections, are an enduring topic in the study of economic policy-making. The literature explains PBCs based on the fact that politicians are better informed than most voters and thus can use the manipulation of fiscal variables to essentially fool the public into thinking they are more efficient than they actually are. In a recent article in the Journal of European Public Policy, Mark Hallerberg and I propose a quite different explanation, one that does not depend on voters being naïve. Rather, we argue that a source of variation in the extent of PBCs is, via the effect of clientelism, the level of economic development.