Voters as Fiscal Liberals: Incentives and Accountability in Federal Systems

Mark P. Jones

Department of Political Science

Rice University

United States of America

Osvaldo Meloni

Department of Economics

Universidad Nacional de Tucumán

Argentina

Mariano Tommasi

Department of Economics

Universidad de San Andrés

Argentina

Corresponding Author (Jones) Contact Information

Phone: (713) 348-2107

Fax: (713) 348-5273

E-Mail: mpjones@rice.edu

January 10, 2009

ABSTRACT

Popular conventional wisdom suggests incumbent politicians and parties use public

spending to improve their chances of reelection. However, most empirical evidence

suggests the opposite of this conventional wisdom, finding voters tend to penalize deficits

and spending growth. This general finding, which Peltzman (1992) has termed “voters as

fiscal conservatives,” has been replicated both across countries and across subnational units

within countries. In contrast to this general trend in the scholarly literature, a handful of

recent studies of federal systems, including this paper, find a result that better fits the

popular conventional wisdom than the conclusions reached by Peltzman and others, that is,

voters reward public spending. We provide a simple framework that accommodates both

sets of findings, and argue that the structure of fiscal federalism is a crucial difference in

explaining these results. Argentine voters reward those governors who provide higher

spending because these governors are effective at extracting resources from the federal

government.

Keywords: Accountability, Elections, Federalism, Public Expenditure

JEL Classification Codes: D72, P16

2

1. Electoral Effects of Public Spending Throughout the World

The aim of this paper is twofold. First, it examines how the probability of reelection of

Argentine provincial governors (or of their copartisans) is affected by provincial spending

during their term in office. Second, it embeds the findings for the Argentine case in the

broader empirical and theoretical discussion regarding fiscal behavior and political

accountability around the globe.

It is popularly believed that incumbent politicians use public spending to improve

their reelection prospects. For this strategy to make sense, increases in spending should

lead to better electoral outcomes. In spite of the fact that this view is so ingrained in

popular conventional wisdom, the empirical evidence has tended to produce the opposite

result. The keystone reference for this literature is Peltzman (1992), who finds U.S. voters

penalize federal and state spending growth. Peltzman’s seminal “Voters as Fiscal

Conservatives” laid the groundwork for the subsequent literature on this crucial topic. The

finding of a negative (or at least non-positive) effect of the manipulation of fiscal

aggregates on electoral success has tended to reappear in most subsequent work in this area

at both the national and subnational levels.

At the level of national elections, in the most comprehensive recent cross-national

study, of 74 countries from 1960 to 2003, Brender and Drazen (2008) find no evidence that

fiscal deficits help reelection in any group of countries. Furthermore, they find deficits

indeed reduce the probability of reelection in developed countries, as well as in established

democracies.1 Examining the subnational evidence within countries, studies of elections at

the state and municipal level also have tended to find that voters punish, rather than reward,

loose fiscal policies. For the U.S. states, recent studies have confirmed the original results

of Peltzman (e.g., Matsusaka 2004, 2008). For Israeli municipalities, Brender (2003) finds

that expansive fiscal behavior by mayors significantly reduces their probability of

reelection. Similarly, for Colombia, Drazen and Eslava (2007) reveal that local voters

1 Their finding confirms previous results, such as those of Alesina, Perotti and Tavares

(1998), who find fiscal austerity has positive rather than negative political effects at the

national level.

3

penalize budget deficits.2 In a broad survey of the political economy of fiscal policy,

Eslava (2006) reports similar results: “various country studies for both developed and

developing countries show that the share of votes received by the incumbent’s party

decreases with the level of government spending and/or the fiscal deficit observed before

the election” (2006, p. 10).

The dominant finding of this literature has tended to be that voters penalize loose

fiscal policy. Nonetheless, a small number of recent articles though have begun to find the

opposite result at the subnational level in a few federations in the developing world: Russia

(Akhmedov and Zhuravskaya, 2004), Brazil (Sakurai and Menendez-Filho, 2008), and

Argentina (this paper). In these three studies, higher spending increases the chances of

reelection at the regional, provincial, or municipal level.3

In addition to supplying the empirical evidence for the case of the Argentine

provinces since the return to democracy in 1983, this paper provides a first attempt at

interpreting what might lay behind the various (seemingly conflicting) results encountered

in the extant literature. The remainder of the paper is organized as follows. Section 2

provides a brief conceptual discussion attempting to disentangle the micro-foundations

behind the different empirical results. Section 3 presents a very stylized model along the

lines foreshadowed in Section 2. Section 4 describes the Argentine institutional context.

Section 5 details the data and empirical specification, while Section 6 supplies the empirical

results. Section 7 concludes.

2. Discussion: Possible Factors Underlying the Conflicting Findings

Research to date has tended to find a negative effect of increases in public spending on

electoral prospects at the national level across countries and at the subnational level for

some countries (such as the U.S., Israel, and Colombia), and a positive effect at the

2 Drazen and Eslava have interesting results regarding the electoral effects of different

components of spending, a topic to which we return in the empirical section.

3 A more nuanced version of this finding is provided in a study of Portuguese

municipalities by Veiga and Veiga (2007) who find changes in the composition of spending

favoring very visible items enhance electoral prospects.

4

subnational level for the cases of Russia, Brazil and Argentina.4 This section explores

some possible explanations for these different results that have been provided explicitly or

implicitly in the literature.

The wording of Peltzman’s famous article, and of some of the subsequent literature,

seems to imply a preference based explanation.5 Voters in the U.S. states penalize

increases in public spending because they are “fiscal conservatives”. Following that logic,

one would say that voters in the Argentine provinces reward increases in spending because

they are “fiscal liberals”. As we will briefly argue after presenting our model, we are

inclined to reject that as a plausible explanation. Differences in voter preferences across

countries are more likely to be associated with different levels of public spending (and

associated taxes) than with different signs of spending-vote elasticities, which measure

voter response at the margins.

There is a related argument that instead of referring to voters’ preferences in

general, refers to the composition of the electorate, and to who are the relevant swing or

median voters. Applied to our comparison here, the argument could read something like

this: the median voter in Argentina or Brazil is poorer than the median voter in the U.S.,

and hence prefers more spending and taxes than her/his U.S. counterpart. This issue is

quite important but, again, by itself more likely to affect levels of spending, rather than the

marginal response of votes to changes in spending.

4 The underlying literature has analyzed the electoral effects both of (increases in) spending

and of fiscal deficits. It would be possible to engage in a finer discrimination of the

available results in terms of the fiscal variable of interest, as different theories (and

different conditions of applicability within each theory) could have different implications

regarding these two variables. For brevity, in the rest of the paper we refer to public

spending growth as the fiscal variable of interest. This is in part driven by the fact that, for

reasons articulated below, that is the relevant and feasible empirical variable to utilize in

the case of the Argentine provinces, as well as by the fact that it is the same variable used in

the seminal study of the U.S. states by Peltzman (1992).

5 For instance Eslava (2006, 10) states “Findings regarding the fiscal preferences of voters

are no less surprising.”

5

Several articles refer to the different degrees of voter awareness or ability to process

information as another source of possible variation across countries or within countries over

time, in particular as democratic learning takes place, or as fiscal transparency increases.

These issues have been emphasized at the cross-national level (Brender and Drazen 2008;

Alt and Lassen 2006), in the U.S. states (Alt, Lassen and Skilling 2002), in the Israeli

municipalities (Brender 2003), and in the Russian regions (Akhmedov and Zhuravskaya,

2004).6 Most of these authors attempt to explain the difference between a significant, and a

insignificant, coefficient for the response of voters to spending. For instance, Brender

(2003) finds insignificant effects in early elections in Israel, but by 1998, discovers that

Israeli voters were already “acting as Americans” and penalizing increases in spending.

We believe that the information and learning story is a relevant one in general, but we

suspect (and the data seem to point in that direction) that it is not the main reason why

results in the Argentine provinces are different from those in other locales.

Our own explanation of why the response of voters is different in some federations

like Argentina, Brazil, and Russia lies in the answer to the question: “Who pays for the

increases in spending?” At the level of the country as a whole, or of subnational units in

countries like the U.S., the answer to that question is “mainly the citizens of that polity.” In

countries like Argentina, the answer is “mainly the central government (and hence the

taxpayers of the whole country.” The difference lies in the structure and political workings

of fiscal federalism. For subnational units in countries along the lines of Argentina (and

Brazil, and Russia), a portion of provincial spending is, at the margin, financed out of a

common pool of resources administered by the central government.

Argentina, Brazil, and Russia are often depicted as the archetypical cases of soft

budget constraints for subnational governments. Weingast’s well known concept of

“market-preserving federalism” has subnational governments facing hard budget

constraints as one of its key conditions. In various articles, he lists Argentina, Brazil, and

Russia as not fulfilling this condition, and the U.S. as one of the cases fulfilling it (see for

6 The latter article refers mainly to political budget cycles (the tendency for fiscal variables

to fluctuate across the electoral calendar). In this related line of inquiry, Shi and Svensson

(2006) also attempt to explain cross-country variation on the basis of different degrees of

voter information.

6

instance Weingast 2000, 9).7 And clearly, when it comes to voter responses at the national

level, there is no higher level of government that will pick up the bill, such that (inter-

temporal) budget constraints are necessarily harder than in the subnational cases.8

In subnational polities facing soft budget constraints, “who pays what for whom” is

not a purely mechanical game, but rather a game in which different actors can have

differential abilities to play the game. As we will argue for the case of Argentina in Section

4, different governors have differential ability to access central funding. That source of

variation will be the micro-foundation by which the chances of winning are increased by

being able to increase spending.

To some extent, the reasons why voters reward public spending in Argentina are the

mirror image of the reasons why voters punish public spending in the U.S. For voters to

behave as Peltzman's “fiscal conservatives”, it has to be the case that the “average” level of

7 Of course all these statements are relative, since the U.S. also has had experience with

federal bailouts (Poterba 1995), but all in all, in comparative perspective, subnational

budget constraints are harder in the U.S. For a historical account of the “hardening” of US

subnational budget constraints, see Wibbels (2003). Wibbels contrasts modern day U.S.

States with countries in which subnational soft budget constraints have been the source of

numerous problems; he mentions Argentina, Brazil and Russia among his five examples of

problematic cases. On Argentina see also Cooper, Kempf and Peled (2005), Nicolini et al

(2002), Dillinger and Webb (1999). In Brazil, soft budget constraints and bailouts for the

states used to be a tremendous problem, and represented the source of a number of

macroeconomic crises. The situation has improved in the last few years around the

enactment of the Fiscal Responsibility Law, but some of the former gaming still takes place

(Rodden 2003; Rezende and Afonso 2006). Ferreira and Bugarin (2007) emphasize such

gaming at the level of municipal governments and the ability of Brazilian politicians to

bring resources to the municipality. On Russia ,see Gimpelson and Treisman 2002,

Weingast and de Figueiredo 2002, as well as Treisman 2007 (who in a theoretical

discussion of soft budget constraints uses Argentina and Russia as motivating examples).

8 A partial exception would be the handful of countries that receive an considerable share of

their revenue from international donors and foreign governments.

7

taxation and spending is too high for them, and they reward the governors who are willing

or able to reduce spending.

3. The Model

We turn now to an extremely simplified model that captures the points made in Section 2 in

a very stylized manner. The model illustrates the mechanisms underlying the different

possible correlations between spending and the probability of reelection observed in the

data.

In order for voters to penalize higher spending at the margin (the Peltzman result), it

has to be the case that the “average” level of spending in the polity is supra-optimal. From

that average level of spending and (in the case of hard budget constraints) taxation, voters

will penalize increases and reward reductions. The micro-foundations behind such a

situation are potentially multiple. For instance, it might be the case that governors face

legislatures oriented towards overspending, and different governors have differential ability

to restrain the legislature, an ability that is rewarded by the voters.9 It might also be that

governors themselves are attracted to spending on items that are not highly valued by

(median) voters, and that different governors have this tendency to varying degrees, with

the big spenders being penalized by voters. This is the scenario we will model in sub-

section 3.1. below.

For voters to reward higher spending at the margin (our result), it has to be the case

that increases in spending are welfare enhancing from their perspective. This could

happen: (a) in a hard budget constraint scenario because the extant level of spending and

taxation is too low (for the reverse reasons than those of the previous paragraph)10, or (b) in

a soft budget constraint scenario because increases in spending at the margin are largely

9 This is consistent with the voluminous literature on fiscal institutions which argues that

legislatures are more subject to common pool problems, while executives tend to better

internalize aggregate budget constraints. For a summary of that literature, see von Hagen

(2006).

10 Imagine, for example, that governors on average are overly responsive to groups wanting

low taxes.

8

financed from external sources as opposed to taxes on local citizens. The politically

successful governor is the one who is able to expand the local budget constraint by

obtaining more funds from the central government. This second case is the scenario we

will model in 3.2. below.

Sub-section 3.1 presents the basic structure and a source of variation that induces

the negative correlation observed by Peltzman for the U.S. States. Sub-section 3.2 has the

same simple model, but with an alternative federal fiscal structure, and it is able to generate

a positive correlation between spending and votes. Sub-section 3.3 provides a brief

comparative discussion that prepares the terrain for the ensuing empirical analysis.

3.1. A Simple Micro-foundation for the Correlation between Spending and Reelection

Probability

The model is a very simple version of the rational retrospective voting model of

Barro (1973) and Ferejohn (1986), the workhorse of the first generation of political agency

models (Besley 2006). For expositional simplicity we assume that there is one incumbent

governor and one citizen (as well as a pool of ex ante identical candidates from where a

“challenger” is randomly selected). Richer political micro-foundations (including voter

heterogeneity and distributional politics) could be provided, but this reduced form is

sufficient to deliver the points we want to make to motivate the empirical comparisons.

The incumbent governor chooses to provide a level of public good b, a level of rent

r, and a level of taxation t, in accordance to the government’s budget constraint

where g is public spending. The “rent” r is a reduced form for a number of interests and

mechanisms leading governors to choose to spend in goods that are not as valued by the

(median) voters, and this is precisely the wedge that will end up inducing overspending and

consequently, a negative correlation à la Peltzman. This rent r could represent spending on

items desired by special interests, or by particular groups favored by the governor, his/her

own preferences for some spending, corruption, and the like.11

11 Persson and Tabellini (2000) describe r as representing rents that benefit politicians but

not the general citizen. “We can conceptualize these rents in a variety of ways, from party

finance to outright diversion of resources for private use in connection with the production

of public goods.” (Persson and Tabellini, 2000, p. 70).

brgt +≡=

9

The utility function of the citizen is given by

where α is a random term introduced in order to obtain probabilistic voting from the

perspective of the incumbent, what simplifies the exposition of the results.12 It is a term, not

observed by the governor, that measures how much the citizen prefers the incumbent with

respect to a expected challenger, for issues (such as “looks”) unrelated to the fiscal

decisions we are analyzing. Again for expositional simplicity, we assume that α is

distributed uniformly in [0,1].

The objective function of the incumbent governor is

where E are “ego rents” (reflecting the exogenous value attached to winning the elections

and holding office)13 and p is the probability of winning the election.

Following the Ferejohn retrospective voting rule, citizens reelect the incumbent if

where U is a reservation level of utility, treated as exogenous for simplicity. So that the

probability of reelection is given by:

12 Probabilistic voting models smooth out the objective functions of politicians by

introducing uncertainty (from the point of view of politicians) about the mapping from

policy to aggregate voting behavior. The expected number of votes becomes a smooth

function of policy choices, which guarantees the existence of a Nash equilibrium under

some regularity conditions on the underlying utility and distribution functions. See, for

instance, Persson and Tabellini (2000, chapter 2), and Mueller (2003, chapter 12).

13 According to Besley (2006, p. 40), the psychology literature attaches weight to the way

in which winning an election can bolster self-esteem, which could create a reward to

holding office which was neither dependent on policy nor on extracting private goods,

salary, etc.

α+−= tbuU )(

EprwW .)(. += γ

Utbu ≥+− α)(

))(( UtbuPp ≥+−= α

10

The problem of the government is then given by:

Max

subject to

and

For brevity of exposition we work from now on with the case of and

, what allows for simple closed form solutions. None of the results depends on

the specific functional form. These solutions are:

,

,

,

and

.14

Notice that a higher γ, that is a higher preference for rents r implies a higher level of

spending g and a smaller probability of reelection p. Therefore, in a cross section of

14 In order to obtain values of the probability p between 0 and 1, we require that

],1[EE

Uγγ

−−−∈ .

Eprw .)(. +γ

))(( UtbuPp ≥+−= α

brt +=

)ln()( bbu =

)ln()( rrw =

1* =b

Er

γ=*

Etg

γ+== 1**

EUp

γ−−=*

11

observation units with different γ we will observe a negative correlation between

spending and the probability of reelection, that is, the “voters as fiscal conservatives”

result of Peltzman.

This is a good point at which to return to the “voter preferences” verbalization of

these results. Let us restate that we do not interpret these different results in terms of

preferences, but in terms of institutional incentives. It would be easy to modify our model

to explicitly introduce different (median) voters’ preferences. “Conservatives” will be

voters that have a lower weight for public goods and/or a higher weight for private goods

(more tax aversion) in their utility function; and “liberals” will be voters that have a higher

weight for public goods and/or a lower weight for private goods (less tax aversion) in their

utility function. Say, for instance, that we add a multiplying term η to the citizen’s

preference for public goods, making his utility function

In such a case, a very high η would induce a high level of spending and of taxes, but under

the other assumptions of this section, we will still have a negative correlation between

spending and votes at the margin, in spite of the voters being quite “liberal”.

3.2 Electoral accountability with soft budget constraints

We analyze now the same model as before, but with a different budget constraint for

the local government. The literature on fiscal federalism has studied the nature of budget

constraints linking multilevel governments in federal contexts. We use a formulation that

subsumes in a simple way various formulation in the literature that emphasize the way in

which intergovernmental financing schemes affect the incentives of lower governments

(see, for example, Careaga and Weingast 2003, Sanguinetti and Tommasi 2004, Cooper et

al 2005, Boadway and Tremblay 2006, and Treisman 2007).

In particular, the budget constraint of the local government now becomes:

))(1( rbmt +−=

αη +−= tbuU )(

12

where m is the fraction of provincial spending that is financed (“bailed out”) by the national

common pool of taxes. As we discussed in the previous section, and will see in more detail

below for the case of Argentina, there are various channels by which this “external”

financing takes place. Also, different incumbent governors will be characterized by

different m’s, that is, by differential abilities to play the game enabling them to extract

more resources from the center.

This new problem has as solution (again in the log-utility case):

and

In this case, a higher m implies both a higher g and a higher p. 15 And in a cross section of

units with different m’s, we will observe a positive correlation between spending and the

probability of reelection, a result that by analogy to Peltzman’s famous title we refer to as

“voters as fiscal liberals.”

15 Careaga and Weingast (2003) present a model, with a complementary logic to the one

presented here, in which a lower percentage of locally charged taxes retained by the

subnational government (which given overall budget constraints in the federation are

analogous to lower average ms) changes the composition of local spending from public

goods to rents and corruption.

)1(

1*

mb

−=

)1.(*

mEr

−=

γ

mE

m

tg

−

+

=−

=1

1

1

**

γ

EU

mp

γ−−

−=

1

1ln*

13

3.3. Discussing the Results

If we now put both comparative statics results together, we have forces (such as

different γs) leading to a negative correlation between spending and votes, and forces (such

as different ms) leading to a positive correlation. Which of those forces is more relevant in

each sample, will determine whether we expect to find a negative (voters as fiscal

conservatives) or a positive (voters as fiscal liberals) correlation.

We will argue that (in comparative perspective) the U.S. is a case in which m is

very low (roughly zero) for all of the states, so that the relevant source of variation

underlying the correlations in the data will be γ. The point is even more evident if we think

in terms of the cross national evidence. Countries do not have higher level governments

who could occasionally pick up the bill, so that they all face m=0, and the source of

variation is something more akin to γ.

Regarding the case of Argentina, in the next section we provide a more detailed

discussion on the bases of specialized secondary sources indicating that: (a) the Argentine

provinces all tend to be governed by politicians with very high γ, and (b) that m is an

important source of variation across observations, and electoral success is in part explained

by the ability to obtain resources out of the common pool administered by the central

government.

4. Fiscal and Political Environment in the Argentine Federation16

Argentina is a federal republic. It has 23 provinces plus the Autonomous City of Buenos

Aires, the national capital which for practical purposes is treated here as the 24th province.

Provincial governments undertake a large share of total spending in Argentina, yet

they collect only a small fraction of taxes. Provincial spending accounts for 50% of total

consolidated public sector spending. This figure rises to close to 70% if we exclude

payments made by the national pension system. Furthermore, the type of spending in the

hands of provincial governments tends to be politically attractive (such as public

16 The description provided in this section draws from Saiegh and Tommasi (1999), Jones,

Sanguinetti and Tommasi (2000), Tommasi (2006), Spiller and Tommasi (2007), Benton

(2008), and Ardanaz, Leiras, and Tommasi (2008).

14

employment and social programs) because it is dear to the interest of territorially based

constituencies.

On average, provinces finance only 35% of provincial spending with their own

revenues. The rest of their spending is financed from a common pool of resources, under

the country’s Federal Tax-Sharing Agreement (FTSA). In a large number of less populous

provinces, the transfers received under the FTSA and related regimes constitute over 80%

of provincial revenue. Provincial politicians, then, enjoy a large share of the political

benefit of spending, yet pay only a small fraction of the political cost of taxation.

<insert Table 1 here>

Even though the Argentine tax sharing agreement appears on paper to be fairly

automatic, in practice there has been over the years a number of channels by which the

national government has had discretion at the margin in the allocation of funds to the

provinces. The methods by which these channels have been modified are multiple, and

their relative use and importance has varied over time, depending on various economic and

political circumstances, but the underlying political logic has always been the same.17

With regards to the political environment of the Argentine federation, the recent

literature has convincingly established that the provinces are very important arenas for the

construction of political power at the national level in Argentina, and that, within the

province, governors (that is, the provincial executives) are dominant figures.18 The

17 In an excellent overview on the sources of subnational soft budget constraints across

countries, Wibbels (2004, 9) states: “Soft budget constraints have historically taken on a

number of forms in various national contexts, including rediscounts of local debt by central

banks, intergovernmental transfers that reward local budgetary disequilibria, the

assumption of local debt by national governments, lack of controls on subnational

borrowing autonomy, and even the issuance of script by some provincial governments.”

After that general statement, Wibbels goes on to describe one archetypical case in which all

these channels have been utilized at some point, and his country of choice is Argentina

(Wibbels 2004).

18 See, for instance, De Luca, Tula and Jones (2002), Jones et al. (2002), Spiller and

Tommasi (2003), Eaton (2005), Jones and Hwang (2005), Levitsky and Murillo (2005),

Remmer (2007), Ardanaz et al. (2008), and Benton (2008).

15

influence of the provinces in the national political and policymaking arena operates through

various channels: electoral, legislative, and partisan. Provinces are the electoral district for

all positions in the national Congress, and this endows local party leaders (generally, for the

party in power, the governor) with an important role to play in national politics. For those

reasons, provincial governors in Argentina tend to be the leaders to whom national

legislators respond. As a consequence, when the national executive wants to pass

legislation in Congress, he/she needs the support of provincial leaders who in turn instruct

their deputies and senators in Congress to support the legislation. This leads to exchanges

of support in the Congress for fiscal favors from the national executive.

The fact that governors are dominant figures in the province is due to a combination

of institutional factors that assign them substantial power, with broader political factors

relating to the previous discussion. Governors are the middlemen between the province and

the fiscal resources distributed at the center. With the money they obtain from that game,

they finance their clientelistic political machines in the province.19 Furthermore, since the

return of democracy in 1983, the more powerful governors (with aligned legislatures,

subservient judiciaries and captive electorates) have managed to reform the provincial

constitutions to further reinforce their institutional power. These reforms have included

allowing for immediate gubernatorial reelection, expanding the governor’s legislative

powers, altering the composition of provincial Supreme Courts, and changing the electoral

rules to augment majoritarian biases in favor of the governing party (Ardanaz et al. 2008;

Calvo and Micozzi 2005).

There are various reinforcing effects between the nature of politics at the provincial

level, and the way national politics interacts with provincial politics, including the peculiar

management of fiscal federalism. Gervasoni (2006) uses rentier theories of the state to

explain the weaknesses of democracy in the Argentine provinces as a consequence of the

19 On clientelism in Argentina, see Calvo and Murillo (2004), Brusco, Nazareno and Stokes

(2004), Stokes (2005), and Remmer (2007).

16

fact that governors finance most public spending from resources not obtained from direct

taxes on the province’s citizenry.20

In sum, as argued by Ardanaz et al. (2008), the importance of provinces in national

politics, and the dominance of governors in national politics, are factors that reinforce each

other. In order to be successful in this two-level game, it is important for governors to be

good at the game of extracting resources from the center.21 That is the motivation of why

m is a crucial factor in understanding the electoral rewards to increasing provincial

spending.

5. Data Description and Empirical Specification

Since its return to democracy in 1983, Argentina has held gubernatorial elections regularly

in most of its 24 provinces every four years: 1987, 1991, 1995, 1999 and 2003.22 The

exceptions, which result in gaps in our panel, are the provinces of Corrientes, Tierra del

Fuego, and the City of Buenos Aires. For Corrientes we only consider the 1983, 1987, and

1991 elections, since in the other electoral years the province was “intervened” by the

national government and governed by a federally designated administrator in such a way

that is it not possible to define incumbency. Tierra del Fuego and the City of Buenos Aires

achieved autonomy from the national government in the 1990s, with gubernatorial elections

first taking place in 1991 in Tierra del Fuego and 1996 in the City of Buenos Aires.

The basic equation we estimate is:

WINNERit = αααα0 + αααα1 EXPENDITUREit +αααα2 POLITICALit + αααα3 SOCIOECONOMICit + εεεεit

WINNER is a binary variable that takes the value 1 when the incumbent party wins the

gubernatorial election and 0 when it is defeated. We test for the effect of the growth rate of

20 This is consistent with an argument presented by Ferreira and Bugarin (2007) for the case

of Brazil, and by Careaga and Weingast (2003) for the case of Mexico, as well as with the

model and argument presented in this paper.

21 See also Gordin (2006).

22 We omit the 2007 election cycle since the data for some of the economic variables we

use in the analysis are not trustworthy at this point in time.

17

real public expenditures per capita (EXPENDITURE) from the beginning to the end of the

gubernatorial period on the incumbent party’s probability of winning the gubernatorial

election at time t in province i. We posit that total expenditure, and not fiscal deficit, is the

proper fiscal measure to capture the opportunistic behavior of incumbent parties. For most

of the provinces and periods under study a great deal of discretionary transfers were the

result of prior agreements between the governors and the President, and hence deficits

reflect accounting decisions rather than a particular policy aimed at preserving power in the

province. For example, public accounting norms include some transfers such as Aportes del

Tesoro Nacional (ATN) as a source of deficit financing, but governors spend using these

funds because they have a pre-existing agreement with the federal government to receive

certain amounts in ATN transfers during the year. Likewise, as mentioned in the previous

section, fiscal deficit is not a uniform measure throughout the period under the analysis.

The principal estimation method employed in this paper is Binary Logit with

random effects.23 We control for a number of political and socioeconomic variables

identified in the literature as relevant for reelection prospects. A more detailed presentation

and description of the data and sources is provided in the Appendix.

The impact of political factors is controlled for employing four variables: the

normal share of votes for the incumbent party in a given province (PARTY), a dummy

variable that measures the extra electoral benefit that a party receives when the incumbent

governor himself runs for reelection (REELECTION), the margin of victory of the

incumbent party in the prior gubernatorial election (MARGIN), and a final dummy variable

23 Since our dependent variable does not vary in one-half of the provinces (where the

incumbent party was never defeated during the analysis period) the use of binary logit with

fixed effects leaves us with substantially fewer observations. However, for the provinces in

which WINNER varies, we ran a Binary Logit analysis with both fixed and random effects

and performed a Hausman test, which indicated no significant differences between these

two estimation models. We also computed conditional fixed effects, having regions (NOA,

NEA, Cuyo, Centro, Patagonia, Pampeana) as controls for the key fixed effects of the

"area". This latter analysis provided results that are substantively similar to those presented

here.

18

that captures the possible coattail effects favoring members of the party winning the

national election (NATLCOAT).

The “normal” share of votes of the incumbent party (PARTY) reflects various

concepts such as political inertia, ideological affinity, and partisan identification. We

operationalize this concept employing the share of votes in the biennial Chamber of

Deputies election held two years prior to the year of the respective gubernatorial election

(i.e., in 1985, 1989, 1993, 1997 and 2001 respectively).24 Chamber of Deputies elections

usually best capture the party vote since candidates on the parties’ closed lists generally

have low name recognition, with ballots cast more along party lines rather than based on

the candidates’ personal characteristics. We assume that the chance of victory of the

incumbent party increases the greater the baseline level of popular support for the party in

the province. In a similar vein, the larger the margin of victory of the incumbent party in

the previous gubernatorial election (MARGIN), the greater its prospects of victory in the

following election. A large margin of victory in the prior election often indicates a

strong/popular incumbent party or governor and/or a feckless/fragmented opposition.

REELECTION assumes that incumbent governors running for reelection (coded

one) devote more effort and resources to the effort by the incumbent party to remain in

office than do those governors who either are constitutionally prohibited from running or

have voluntary decided not to stand for a new term (coding zero).25 Only a small handful

of governors eligible to run for reelection have declined (primarily for idiosyncratic

reasons) to do so since 1987.

We expect the simultaneity of gubernatorial and presidential elections

(NATLCOAT) to be positively correlated with our dependent variable, because when the

elections are held simultaneously, media coverage of the presidential campaign dominates

24 Members of the Chamber of Deputies are elected on closed party lists from multi-

member electoral districts (the provinces) using proportional representation, with the

Chamber renewing by halves every two years.

25 At the time of the return to democracy in 1983, all provincial constitutions prohibited

incumbent governors from running for immediate reelection. Since then, an overwhelming

majority of the provinces have reformed their constitution to allow governors to run for re-

election (often limiting the governor to two consecutive terms in office).

19

the electoral process, in detriment to the provincial campaigns. Before the 1994

constitutional reform, gubernatorial and presidential election years coincided every twelve

years as the President and governors were elected for six and four year terms respectively.

As part of the 1994 constitutional reform, the presidential term was shortened to four years,

and since 1995 the presidential and gubernatorial elections have been held the same year in

virtually all of the provinces. However, all of the provincial constitutions authorize the

governors to hold the gubernatorial election on a different date from the presidential

contest, thereby avoiding simultaneity (although in these instances the provincial

governments must pay the entire financial cost of holding the nonconcurrent provincial

elections). Since 1995, approximately one out of every four gubernatorial elections has

been held concurrently with the presidential contest.

In addition to the political control variables discussed above, we also included

variables to control for traditional socioeconomic factors, such as changes in provincial

GDP per capita (GDP per capita) and the unemployment rate (UNEMPLOYMENT). We

expect an increase in the incumbent party’s probability of victory as provincial GDP per

capita rises and unemployment decreases. Another socioeconomic control is the property

crime growth rate (CRIME), which is expected to be inversely associated with the

dependent variable. Over the past dozen years, unemployment and crime have been ranked

by Argentines in public opinion surveys as two of the most important policy issues facing

the country. We also controlled for the business cycle and the inflation rate. Following

Gélineau and Remmer (2005) we posit that a growing national economy and a low inflation

rate improve the probability of victory of incumbent provincial parties affiliated with the

party of the President. To capture these effects we constructed two variables interacting a

dummy that takes the value of one if the incumbent governor is a member of the President’s

party and zero otherwise (called SAME) with the national GDP growth and the inflation

rates, labeled CYCLE and INFLATION respectively.26

26 CYCLE and the growth rate of provincial GDP per capita are included to control for

different economic effects on the incumbent’s probability of victory. While the former

attempts to capture the impact of the business cycle, as mentioned above, the latter is a

proxy for the rate of growth of personal income in a given province. Given these

20

6. Empirical Results

6.1. Base Models and Results

Results for our basic specification are presented in Table 2. Column I presents the

values for our control variables only, in order to provide a benchmark, while Columns II

and III incorporate our key explanatory variable, the rate of growth of the real per capita

public expenditure (EXPENDITURE), and examine its effects. As Column II failed to

uncover either a coattail effects favoring members of the party winning the national

election (NATLCOAT) or a REELECTION effect, NATLCOAT and REELECTION are

excluded from Column III. Column III presents the model with the best overall fit, and is

therefore the one which we focus on here.

<insert Table 2 here>

In all the models we have run, the estimated coefficient for our focal variable, the

growth rate of real per capita public expenditure (EXPENDITURES), is always significant

and its inclusion notably improves the fit of the models (compared to the baseline model in

Column I that is restricted to the control variables). As a robustness check, we also ran all

of the analysis limiting the sample population to those provinces with at least five time

points of data, with the results provided substantively similar to those presented here. That

is, our finding of a strong and significant positive effect of an increase in expenditures for

electoral victory by the incumbent party in a province is not contingent on the inclusion or

exclusion of any key group of provinces or election years.

We also utilized a Binary Logit fixed effects model which, while reducing the

number of observations available for the analysis, still finds a significant positive impact of

EXPENDITURES on the probability of electoral victory by the incumbent party. Finally,

as it is not possible to calculate predicted probabilities employing a random effects model,

Table 3 provides predicted probabilities calculated from a standard Binary Logit model

identical to Model III in Table 2. The substantive results for all independent variables

differences, it is not surprising that the correlation between both variables is a relatively

modest 0.376.

21

using this methodology, including our focal EXPENDITURES variable, are extremely

similar to those in Model III.27

<insert Table 3 here>

Table 3 provides the predicted probability (and 90% confidence interval) of victory

by the incumbent political party’s candidate under five distinct spending scenarios (with all

other variables placed at their respective mean value). One extreme is represented by a

growth rate in per capita spending that is two standard deviations below the mean (at

-66.16). An incumbent party with an expenditure growth rate at this value has a 0.465%

probability of victory (with a 90% confidence interval that ranges from 0.140% to 0.823%).

The next entry is represented by a value for EXPENDITURE that is one standard deviation

below the mean (-33.21). For an incumbent party with an expenditure growth rate of

-33.21, the probability of victory is 0.743% (0.555% to 0.895%). For parties with

expenditure growth rates that are one (32.70) and two (65.66) standard deviations above the

mean, the probability of victory is 0.972 (0.930% to 0.993%) and 0.989% (0.963% to

0.999%) respectively.28

Reviewing these posteriors and their respective 90% confidence intervals, it is

apparent that incumbent parties with expenditure growth rates that are one and two standard

deviations above the mean are significantly (i.e., their 90% confidence intervals do not

overlap) more likely to achieve victory than their counterparts with expenditure growth

rates that are one and two standard deviations below the mean. The results here make clear

27 For instance, the estimated coefficient and standard error for EXPENDITURE were

0.0398 and 0.0155 respectively (compared to 0.0413 and 0.0166 in Model III).

28 The use of alternative EXPENDITURE values to calculate predicted probabilities

(holding all other variables at their mean values) results in similar conclusions. For

example, the predicted probability of victory at the minimum observed value for

EXPENDITURE (-53.9) is 0.568% (0.260% to 0.855%) while the predicted probability at

the maximum observed value for EXPENDITURE (76.5) is 0.991% (0.969% to 1.000%).

Similarly the predicted probability for victory at an EXPENDITURE value located at the

25% quartile mark (-31.15) is 0.759% (0.580% to 0.899%) while that for victory at an

EXPENDITURE value located at the 75% quartile mark (24.65) is 0.965% (0.920% to

0.988%).

22

that Argentine voters rreward governors who increase spending, with those governors who

spend the most virtually guaranteed of reelection (for them or their party).

In regard to the control variables, as anticipated, the probability of victory increases

the higher the normal share of votes of the incumbent party (PARTY) and the higher the

margin of triumph in the previous gubernatorial election (MARGIN). Regarding

socioeconomic controls, high unemployment rates (UNEMPLOYMENT) and rising

property crime rates (CRIME) proximate to a gubernatorial election have a clear adverse

impact on the incumbent party’s chances of victory. On the contrary, good economic

conditions, measured by the rate of growth of the Argentine GDP (CYCLE), the inflation

rate (INFLATION), as well as by the provincial GDP per capita (GDP Per Capita), help

incumbent parties (those affiliated with the President’s party in the former two cases) to

obtain victory.

6.2. Extensions: Democratic Consolidation and the Composition and Timing of Spending

Ideally, we would like to be in a position to explore alternative micro-foundations

for our finding for the Argentine case, and to do so via a comparison with the results for

other countries. Unfortunately, we are not in a position to fully answer that comparative

question given the limitations of our data. In spite of these limitations though, in this

section we forward some initial thoughts on this topic as motivation for future comparative

work. We take advantage of some within-case variation in Argentina in order to

preliminary explore some alternative explanations, and to connect with some of the broader

discussions in the literature.

One explanation for the within Argentina finding being different than that, say,

within the U.S., as discussed in Section 2, would emphasize the degree of voter information

and understanding of the fiscal variables and of the political game underlying them.

According to those interpretations, as democracy matures, and as information and

transparency improves, voters should be less likely to vote in favor of increases in

spending. This temporal exercise has been performed by Brender 2003 for Israel,

Akhmedov and Zhuravskaya 2004 for Russia, and Brender and Drazen 2008 for a cross

section of countries. Between 1983 and 2003, Argentina improved the transparency of its

fiscal accounts. For instance, in 1999 a special IMF report on transparency stated: “It is

clear that Argentina has made important and highly commendable improvements to its

23

transparency practices in many areas over the last decade. Transparency is generally high in

each of the four areas assessed here - data dissemination, fiscal, monetary and financial

policy transparency.” (IMF 1999, 12). Following those suggestions in the literature, one

might expect that if our results are induced in part by voters not fully understanding that

eventually they will have to pay one way or another for the spending increases, the positive

relationship between spending and victory would diminish over time as the country’s

experience with democratic practices deepens and becomes more routinized and stable

while at the same time levels of transparency rise.

<insert Table 4 here>

We split our sample of elections in various ways. Table 4 provides an example of

such a partition between the early elections during the first ten years of democracy (1987,

1991) and the more recent elections (1995, 1999, 2003). Table 4 provides no evidence of

democratic maturity or increased transparency reducing the “voters as fiscal liberals” effect.

If anything, the effect strengthens slightly over time. Other work, such as Ardanaz et al.

(2008) analyzes how the logic of Argentine politics centered on “governors getting money

from the center” has been consolidating over time. It appears that voters understand that

logic and vote accordingly.

We close our empirical analysis of the Argentine case by briefly exploring two

issues that have been identified as important in the previous literature: the electoral

implication of the composition of spending and of the timing of spending. Some authors

(e.g., Peltzman 1992; Drazen and Eslava 2007) have raised the important question of

whether spending on some items is especially rewarded at the voting booth. Table 5

presents our statistical analysis where we distinguish between the growth rates in capital

spending (CAPITAL EXPENDITURE) and current spending (CURRENT

EXPENDITURE). We also included a variable that includes all expenditures (TOTAL

EXPENDITURE, the EXPENDITURE variable from the previoous tables) as well as the

ratio of current to capital expenditures (RATIO CURRENT/CAPITAL) and the rate of

growth of the current to capital expenditures (RATE OF GROWTH). The results in Table

5 suggest that both types of spending are rewarded but changes in the expenditure mix are

irrelevant.

<insert Table 5 here>

24

Finally, a sizable literature on political budget cycles emphasizes the tendency of

incumbents to manipulate fiscal variables in election years. In Table 6 we attempt to verify

whether spending in election years is especially rewarded in contrast to spending

throughout the governor’s term in office. Following Sakurai and Menezes-Filho (2008), we

compute the rate of growth of real per capita total expenditure between the election year (t)

and the average expenditure in t-1, t-2 and t-3 (ELECTION YEAR AVG

EXPENDITURE). To be thorough, we also calculate the rate of growth of real per capita

total expenditure in the election year (that is, between t and t-1), labelling this variable

ELECTION YEAR EXPENDITURE. The results of our analysis indicate that there is no

impact of election year spending alone on the probability of victory. Rather, voters evaluate

the entire gubernatorial period rather than short-run profligacy. Table 6 suggests no special

benefits from spending specifically in the year of the election. From our understanding of

Argentine politics and public finance, we believe governors spend as much as they can

whenever there is an opportunity, which in large part helps to explain this result.

<insert Table 6 here>

7. Conclusion

In this paper we explored the effects of public spending in gubernatorial elections in the

Argentine provinces. Our principal conclusion is that Argentine provincial voters reward

spending. We argue that this result, contrary to that found for the U.S. states, is due to the

structure and political workings of Argentine fiscal federalism. The rules and procedures

governing the fiscal relations between the country’s national government and provinces,

make it entirely rational for voters to reward spending by the incumbent political party in

provincial gubernatorial elections. This paper constitutes one step in a broader scholarly

agenda to develop more comprehensive cross-country comparisons of subnational

accountability across federations.

8. Acknowledgements

This paper is part of an agenda that Jones and Tommasi started with Pablo Sanguinetti

some years ago. We thank Pablo for his direct and indirect input into this paper. We

25

received valuable comments from Mauricio Bugarin, Víctor Elías, Juan Pablo Micozzi,

Esteban Nicolini, Martín Rossi, and Jorge Streb, and seminar participants at Universidad de

San Andrés, Universidad Nacional de Tucumán, Universidad Nacional de La Plata,

Universidad del CEMA, and the meetings of the Latin American and Caribbean Economic

Association in Bogotá. We thank Laura Trucco for valuable comments as well as for superb

research assistance. This research is based on work supported by the Universidad Nacional

de Tucumán (project 26/F408), Agencia Argentina de Promoción Científica y Tecnológica

(Proyecto 21226- PICT 2004), United States of America National Science Foundation

(Grant SES 9911140), and John Simon Guggenheim Memorial Foundation.

9. Appendix

Data sources: Real expenditures as well as real revenues at constant 2003 prices were

drawn from the Secretaría de Hacienda, Ministerio de Economía. Population data and

provincial GDP at constant prices were obtained from the Universidad Nacional de La Plata

as well as the Instituto Nacional de Estadística y Censos (INDEC). The crime rate figures

were collected from the Dirección Nacional de Política Criminal, Ministerio de Justicia y

Derechos Humanos. The unemployment data were taken from the INDEC. Political and

electoral data come from the Dirección Nacional Electoral. More details on the data and

the operationalization of the variables are provided in the table below.

Table A1. Operationalization of Variables Employed in the Statistical Analysis

Abbreviation Description

WINNERit Dummy variable that takes the value 1 if the incumbent party

wins the gubernatorial election t in the province i, and 0

otherwise.

REELECTIONit Dummy variable that takes the value 1 if the incumbent

governor runs for reelection in the province i at the

gubernatorial election t, and 0 otherwise.

MARGINit Difference between the percentage of votes obtained by the

incumbent party and the main rival in the province i at the

gubernatorial election t.

26

SAMEit Dummy variable that takes the value 1 when the incumbent

governor is belongs to the same party as the President and 0

otherwise.

PARTYit Percentage of votes obtained by the incumbent party in the

Chamber of Deputies election held two years before the

gubernatorial election t in province i.

NATLCOATit Dummy variable that takes the value 1 when the gubernatorial

elections is held on the same date as a presidential election and

the incumbent party is PJ (1995, 2003) or UCR/FREPASO

(1999); -1 when the gubernatorial election is held the same date

as the presidential election and the incumbent party is different

from PJ or UCR/FREPASO, and 0 otherwise.

EXPENDITUREit Growth rate of the real total expenditures per capita for

province i between the end and the beginning of the

gubernatorial term.

CURRENT

EXPENDITUREit

Growth rate of the real Current expenditures per capita for

province i between the end and the beginning of the

gubernatorial term.

CAPITAL

EXPENDITUREit

Growth rate of the real Capital expenditures per capita for

province i between the end and the beginning of the

gubernatorial term.

RATIO

CURRENT/CAPITALit

Ratio of current to capital expenditures for province i (average

for the gubernatorial period t)

RATE OF GROWTHit Growth rate of the Ratio of current to capital expenditures for

province i

ELECTION YEAR

EXPENDITUREit

Growth rate of the real total expenditures per capita for

province i between the election year and the previous year.

ELECTION YEAR

AVG

EXPENDITUREit

Growth rate of the real total expenditures per capita for

province i between the election year and the average

expenditure in the gubernatorial period.

GDP Per Capitait Growth rate of the real provincial GDP per capita for province

i in the last year of the gubernatorial term that ends in election

t.

27

UNEMPLOYMENTit: Rate of unemployment (level) in the year of the election t in

province i.

CRIMEit Growth of the property crime rate (offenses per 10,000

inhabitants) for province i in the last year of the gubernatorial

term that ended in election t.

INFLATIONit Stands for the interaction between the variable SAME and the

annual inflation rate in the year of the election.

CYCLEit Results from multiplying the variable SAME by GDP growth

rate of the country in the Election Year.

28

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Wibbels, Erik (2004) “Decentralization, Democracy, and Market Reform: On the Difficulty

of Killing Two Birds with One Stone” in David Samuels and Alfred Montero (eds.)

Decentralization and Democracy in Latin America: Causes and Consequences. South Bend,

IN: University of Notre Dame Press.

35

Table 1. Vertical Fiscal Imbalance

Note Vertical Fiscal Imbalance (VFI) was computed as own revenues as percentage of total revenues (average 1983-2003)

Province

Own Revenues as % of Total Revenues

AVG 1983-2003

Formosa 6.2

La Rioja 7.7

Catamarca 9.7

Santiago del Estero 10.8

Corrientes 12.4

Santa Cruz 12.5

Chaco 12.9

San Juan 14.6

Misiones 16.1

Chubut 16.7

Jujuy 17.5

San Luis 17.8

Tierra del Fuego 20.0

Salta 20.6

Tucumán 21.6

Neuquén 21.9

Río Negro 23.9

La Pampa 28.2

Entre Ríos 28.9

Mendoza 31.4

Country average 38.1

Córdoba 39.7

Santa Fe 40.9

Buenos Aires 53.5

City of Buenos Aires 89.4

36

Table 2. Public Expenditure and Incumbent Party Electoral Success

Variables Control Variables (I) (II) (III)

Expenditure 0.0404** (0.0167)

0.0413** (0.0166)

Reelection -0.03985 (0.7235)

-0.4900 (0.7768)

NationalCoat 1.1399 (0.7137)

1.1540 (0.8361)

Party 0.1135*** (0.0400)

0.1053** (0.0438)

0.0928** (0.0383)

Margin 0.0448 (0.0339)

0.0596* (0.0349)

0.0577* (0.0331)

GDP Per Capita 0.0437 (0.0478)

0.0876 (0.0528)

0.0905* (0.0519)

Unemployment -0.1554* (0.0874)

-0.2010** (0.1008)

-0.1797* (0.030)

Crime -0.0208 (0.0166)

-0.0488** (0.0240)

-0.0470* (0.0244)

Cycle 0.2971** (0.1433)

0.4939*** (0.1897)

0.4571** (0.1869)

Inflation -0.0360*** (0.0116)

-0.0469*** (0.0149)

-0.0418*** (0.0133)

Constant 0.8326 (1.6324)

0.1341 (1.7759)

0.0306 (1.7215)

Observations 112 112 112

Districts 24 24 24

Observations per group MIN 2 2 2

Observations per group MAX 5 5 5

Observations per group AVG 4.7 4.7 4.7

Log Likelihood -40.341251 -36.782986 -38.024437

Note: Standard errors below coefficient. *** Significant at .01. ** Significant at .05. * Significant at .10

37

Table 3. Predicted Probability of Victory for Expenditure Values

Value for Expenditure Variable Probability of Victory

90% Confidence Interval

2 Standard Deviations Below Mean (-66.16) 0.465 (0.140 to 0.823) 1 Standard Deviation Below Mean (-33.21) 0.743 (0.555 to 0.895) Mean (-0.25) 0.917 (0.861 to 0.958) 1 Standard Deviation Above Mean (32.70) 0.972 (0.930 to 0.993) 2 Standard Deviations Above Mean (65.66) 0.989 (0.963 to 0.999)

All other variables are set to their mean values. Estimations are based on a Binary Logit analysis whose model and results are substantively similar to Model III in Table 2.

38

Table 4. The Role of Transparency/Democractic Consolidation Variables Elections 1987-1991 Elections 1995-1999-

2003

Expenditure 0.1320* (0.0788)

0.1003** (0.0421)

Party 0.0152 (0.1021)

0.1673** (0.0778)

Margin -0.0049 (0.1094)

0.0916* (0.0486)

GDP Per Capita 0.1599 (0.1077)

0.2830** (0.1398)

Unemployment -0.4939 (0.3640)

-0.3048* (0.1761)

Crime rate -0.0045 (0.0386)

-0.1483* (0.0796)

Cycle 2.3966** (1.0942)

0.4262 (0.3486)

Inflation -0.1169** (0.0473)

-0.0087 (0.2124)

Constant 6.0761 (5.5461)

-0.1730 (2.7148)

Observations 44 68

Districts 22 23

Observations per group MIN 2 2

Observations per group MAX 2 3

Observations per group AVG 2 3

Log Likelihood -10.696875 -19.094603

Note: Standard errors below coefficient. *** Significant at .01. ** Significant at .05. * Significant at .10

39

Table 5. Current versus Capital Expenditures and Electoral Success Variables I II III IV V

Capital Expenditure 0.0152* (0.0079)

0.0091 (0.0078)

Current Expenditure 0.0428** (0.0170)

0.0349* (0.0180)

Total Expenditure 0.0433** (0.0171)

Ratio Current/Capital 0.1658 (0.1396)

0.0930 (0.1252)

Rate of Growth

Party 0.0995*** (0.0383)

0.0972*** (0.0376)

0.0947** (0.0395)

0.0953** (0.0376)

0.1041*** (0.0356)

Margin 0.0555 (0.0343)

0.0546* (0.0323)

0.0608* (0.0337)

0.0663** (0.0328)

0.0487 (0.0329)

GDP per capita 0.0634 (0.0482)

0.0939* (0.0527)

0.0957* (0.0529)

0.0918* (0.0508)

0.0473 (0.0463)

Unemployment -0.1830** (0.0911)

-0.1595* (0.0891)

-0.1835* (0.0950)

-0.2219** (0.1015)

-0.1627* (0.0849)

Crime rate -0.0351 (0.0219)

-0.0440* (0.0235)

-0.0495** (0.0249)

-0.0439* (0.0234)

-0.0190 (0.0165)

Cycle 0.3672** (0.1609)

0.4521** (0.1814)

0.4871** (0.1932)

0.4326** (0.1914)

0.2268* (0.1381)

Inflation -0.0381*** (0.0120)

-0.0417*** (0.0131)

-0.0440*** (0.0139)

-0.0391*** (0.0136)

-0.0295*** (0.0103)

Constant -0.1260 (1.6863)

-0.0500 (1.6619)

-0.0488 (1.7609)

-0.9319 (1.7758)

-1.4377 (1.6563)

Observations 112 112 112 112 112

Districts 24 24 24 24 24

Observations per group MIN

2 2 2 2 2

Observations per group MAX

5 5 5 5 5

Observations per group AVG

4.7 4.7 4.7 4.7 4.7

Log Likelihood -39.238349 -37.9444023 -37.125937 -37.263938 -41.57783

Note: Standard errors below coefficient. *** Significant at .01. ** Significant at .05. * Significant at .10

40

Table 6. Election Year Spending and Electoral Success Variables I II

Election Year Expenditure 0.0044 (0.0180)

Election Year Avg Expenditure 0.0058 (0.0214)

Party 0.1032*** (0.0361)

0.1044*** (0.0361)

Margin 0.0438 (0.0329)

0.0420 (0.0334)

GDP per capita 0.0494 (0.0481)

0.0499 (0.0483)

Unemployment -0.1380* (0.0823)

-0.1380* (0.0818)

Crime rate -0.0211 (0.0181)

-0.0203 (0.0174)

Cycle 0.2648* (0.1441)

0.2682* (0.1465)

Inflation -0.0325*** (0.0108)

-0.0328*** (0.0110)

Constant 0.8836 (1.5548)

0.9126 (1.5517)

Observations 112 112

Districts 24 24

Observations per group MIN 2 2

Observations per group MAX 5 5

Observations per group AVG 4.7 4.7

Log Likelihood -41.825302 -41.817764

Note: Standard errors below coefficient. *** Significant at .01. ** Significant at .05. * Significant at .10