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.

Additional Metadata
Keywords political business or budget cycle, the spending composition of Indian States, visibility of capital expenditures, panel data, ARDL modeling
JEL National Government Expenditures and Related Policies (jel H5), State and Local Budget and Expenditures (jel H72), Asia including Middle East (jel O53), Models with Panel Data (jel C23)
Publisher Department of Economics
Series Carleton Economic Papers
Citation
Ferris, J.S, & Bharatee Bhusana Dash. (2016). Expenditure Visibility and Voter Memory: A Compositional Approach to the Political Budget Cycle in Indian States, 1959 – 2012 (No. CEP 16-14). Carleton Economic Papers. Department of Economics.