Electoral Cycles in Fiscal Policy: Zooming in - Political Budget Cycle Composition and Issue Salience in the European Union

Details

Supervisors

Cassan, Guilhem ; Thomsson, Kaj

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation générale

Abstract

This thesis builds on the literature on Political Budget Cycles by analyzing the composition of such cycles. I propose the degree of salience of issue domains as the theoretical explanation for the choice of fiscal policy instruments being targeted by incumbent governments. The underlying reasoning is that voters are most responsive to public policy changes regarding salient issues and will therefore adjust their vote choice when they observe such changes. I conduct both fixed effects and GMM regressions on a sample of all 28 EU countries for the time period from 1995 to 2015. In these regressions ten different fiscal policy instruments are used as dependent variables as opposed to the aggregate fiscal budget, which is examined in most existing literature on the topic. The results show some evidence of electoral cycles in different policy instruments, but no coherent robust relation with issue salience. I find some evidence that incumbent governments target fiscal policy instruments in which changes in public spending are easily visible to the electorate. These instruments, however, do not appear to be consistently the same as those that are important or salient to Europeans.