Displacing the Political Fiscal Cycle: Blessing or Curse?

• In Event: Campaign Finance in Developing Democracies

Abstract

Political fiscal cycles are pervasive across democracies; there is use of the public purse for political gain close to election dates. What policies are there to stop the political fiscal cycles? And, are they effective? Using microdata on public spending at the contract level, we study the effects of a regulation in Colombia that forbids contracting at all levels of government in the months before the 2018 national elections. We find that there is substantial bunching in spending in the days immediately before the regulation comes into effect. Moreover, these last-minute contracts disproportionately benefit previous and future political candidates irrespective of the level at which the candidate ran/will run. These contracts disproportionately go to contractors without previous experience, and national contracts tend to higher-priced compared to contracts in a non-electoral year. Overall, we find that forbidding contracting actual creates a displacement of the political fiscal cycle rather than stopping it.

Author

• Nelson Alejandro Ruiz, University of Oxford