Democracy, Elections and Allocation of Public Expenditure in Developing Countries

This paper overcomes traditional political budget cycles models, focusing solely on the dynamics of the overall budget, in order to shed light on electoral composition changes in public spending. Using data on 42 developing countries from 1975 to 2001, we find evidence of electoral impacts on the allocation of public expenditure. Our results show that election-year public spending shifts towards more visible current expenditure, in particular wages and subsidies, and away from capital expenditure. Futhermore, our findings suggest that electoral impacts on the allocation of public spending are likely to endure, even though countries gain experience in electoral politics.