Political Budget Cycles or Voters as Fiscal Conservatives? Evidence from Colombia

Abstract

Theoretical models of the political budget cycle suggest that electoral
manipulation of government expenditures can take the form of
changes in the composition of spending, without impacting the overall
budget or the deficit, and that the form and extent of this
manipulation depend on the fiscal preferences of voters. In this paper,
I use data on government expenditures and election outcomes in
Colombia to provide an integrated analysis of voting behavior and the
preelectoral dynamics of government spending. I emphasize potential
changes in the composition, rather than the size, of the budget. I find
that components of the budget that can be identified with targeted
spending grow, and that non-targeted spending contracts, in the year
preceding an election. Consistently, I find that voters reward the
preelection increases in targeted spending, but punish incumbents
who run high deficits before the election.