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Expenditure Visibility and Voter Memory: A Compositional Approach to the Political Budget Cycle in Indian States, 1959 – 2012

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Abstract
In this paper we argue that the search for opportunism in government budgets is weakened by the absence of a strong reason for why such expenditures should be restricted solely to the period leading into the next election. Here we argue that the need to fulfill a set of election platform promises in combination with the characteristic that some budget items better attract the attention of voters (with deteriorating memories) will lead to a predictable reallocation of budgetary spending across the life of a government. Our test for a predictable pattern rather than a specific period of election motivated spending uses capital expenditures as our example of more politically visible budgetary items and a data set of 14 Indian states over 54 years (1959/60 – 2012/13). The results of the hypotheses that capital expenditures as a ratio of both total government expenditure and government consumption alone should rise across the entire governing interval are found to be consistent with this hypothesis and provide a fit with the data that is marginally better than more traditional models that use either all pre-election periods or only the pre-election year of scheduled elections to test for opportunism. The absence of a similar interval effect on aggregate state expenditures and on the net budgetary position suggests that evidence of political interaction with the budget is more likely to be found in its composition rather than in its overall level or in the size of its surplus or deficit.

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  • J. Stephen Ferris & Bharatee B. Dash, 2016. "Expenditure Visibility and Voter Memory: A Compositional Approach to the Political Budget Cycle in Indian States, 1959 – 2012," Carleton Economic Papers 16-14, Carleton University, Department of Economics.
    • Handle: RePEc:car:carecp:16-14
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    Cited by:

    1. Stanley L. Winer & J. Stephen Ferris & Bharatee Bhusana Dash & Pinaki Chakraborty, 2021. "Political competitiveness and the private–public structure of public expenditure: a model and empirics for the Indian States," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(6), pages 1430-1471, December.
    2. Batabyal, Amitrajeet & Beladi, Hamid, 2020. "A Political Economy Model of the Ganges Pollution Cleanup Problem," MPRA Paper 102790, University Library of Munich, Germany, revised 28 May 2020.
    3. Batabyal, Amitrajeet A. & Beladi, Hamid, 2022. "A political-economy perspective on mayoral elections and urban crime," Socio-Economic Planning Sciences, Elsevier, vol. 79(C).
    4. Potrafke, Niklas, 2020. "General or central government? Empirical evidence on political cycles in budget composition using new data for OECD countries," European Journal of Political Economy, Elsevier, vol. 63(C).
    5. Bharatee Bhusana Dash & J. Stephen Ferris, 2018. "Economic Performance and Electoral Volatility: Testing the Economic Voting Hypothesis on Indian States, 1957–2013," Carleton Economic Papers 18-07, Carleton University, Department of Economics.
    6. Sacchidananda Mukherjee & Shivani Badola, 2021. "Public Financing of Human Development in India: A Review," Indian Journal of Human Development, , vol. 15(1), pages 62-81, April.

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    More about this item

    Keywords

    Political business or budget cycle; the spending composition of Indian States; visibility of capital expenditures; panel data; ARDL modeling;
    All these keywords.

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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