Coalition Incentives for Political Budget Cycles

The literature on political budget cycles, i.e. fluctuations in the budget balance during elections, largely assumes governments to be unitary actors. However, in many political systems, political parties share governing responsibility in a coalition. This article examines the intra-coalition dynamics that underlie budget negotiations. A formal model disentangles the individual coalition partners' incentives for pre-electoral deficits. It shows that coalition partners favour higher deficits when they have a larger share in power and when they have broad appeal. Parties that are pivotal in coalition negotiations prefer a smaller pre-electoral deficit