Electoral Rules, Forms of Government, and Political Budget Cycles in Transition Countries

Abstract

Recent studies have suggested the existence of 'election-year economics' in fiscal policy in transition countries. This study asks whether such electoral cycles in aggregate measures (overall expenditures, revenues and balance) and spending composition (broad vs. targeted outlays) differ among countries with different political systems. This question is motivated by a sharp division between majoritarian presidential systems in Central Asia and Eastern Europe, and proportional-parliamentary systems in the Baltic's, Central and Southeastern Europe. Further, in the absence of context-sensitive theories, the paper asks whether observed outcomes in the transition process conform to the theoretical priors developed for conditions in stable democracies. Finally, the paper attempts to normatively establish whether either of the alternative combinations yields more optimal policy outcomes. The results suggest that the differences indeed exist, primarily on the revenue side and in the composition of expenditures. These results differ markedly from those for stable democracies, especially in the case of composition of spending. Normatively, presidential yields sub optimal outcomes in comparison to parliamentarians, likely due to inefficient system of constitutionally intended checks and balances.

Key words: Political budget cycles, Transition countries, Electoral rules, Forms of government, Checks and balances.
JEL: D72, D78, E32, E62, P26, P52.