Further Discussion

One component of context conditionality that is especially neglected in electoral cycle studies is that of electoral challengers, who play little direct role in most models. Higher-quality challengers, for instance, may lead incumbents to expect closer elections, yielding greater electioneering in quality-challenger elections and in systems that usually produce such. Similarly, higher-quality challengers modify incumbent incentives to signal competence. More competent incumbents signal more because they can better distinguish themselves from expected average challengers, perhaps suggesting that quality challengers would incite less electioneering. This may offer some empirical leverage on (and bodes poorly for) competence signaling RE models. Furthermore, electioneering seems to occur empirically both immediately before and after elections, and, indeed, is more pronounced and more certain just after (at least in transfers and deficits; Franzese 2002b)Challengers may explain this too. Incumbents can act on pre-electoral promises and therefore must do so to maintain credibility; winners can and almost always do fulfill their promises (Pomper 1971; Rose 1980; Alt 1985; Gallagher, Laver, and Mair 1995) for like reasons; and, ceteris paribus, candidates who promise more with greater credibility win. Therefore, given that electioneering may have some costs so that incumbents must estimate how much electioneering is optimal to undertake, the empirical pool of preelectoral policy-makers will contain some incumbents who promised-cum-delivered too little/insufficiently credibly, and so lost; whereas post-electoral pools contain winners, returning incumbents and entering challengers, who (on average) will have promised, and so nowmust enact, greater largesse. Thus, the election essentially filters for credibility×promised largesse. Therefore, especially as newly seated governments are the most productive (honeymoons), post-electoral largesse is greater and more certain than pre-electoral. Note, finally, that this could also explain some weaknesses in early studies, which compared pre-electoral periods to all others, including immediate post-election periods. In this section, we have considered empirical and theoretical research that evaluates the extent to which electoral cycles structure the incentives of economic policymakers. While this has been a topic of extensive theoretical development, important inconsistencies in the support lent by empirical research remain.We have emphasized how the context in which policy-makers operate may structure their incentives to electioneer, and how failure to incorporate this context may generate misleading estimates of the effects of electoral incentives in economic policy-making. Although empirical evidence is more consistently supportive of partisan cycles, in which incumbent parties manipulate policy to benefit their constituencies (but see Clark 2003), the accounts provided there too are sensitive to these contextual considerations.
In the next section, we review theoretical accounts of partisan incentives, as well as the related empirical research..

Adaptive Retrospective Citizens Partisan Cycles

In partisan models of political economics, candidates contest and voters adjudicate elections in partisan terms. Parties cultivate ties to different voter groups and nurture reputations for policy-making that favors those groups. Parties and voters value these ties and reputations, so incumbents con...

Rational Prospective Citizens Partisan Cycles

Unlike the electoral cycles case, empirical support for partisan cycles seemed strong, so no particular empirical puzzle motivated RE partisan theory. Rather, Alesina’s (1987, 1988) rational partisan theory (RPT) filled theoretical needs, providing a framework logically consistent with modern RE e...

Further Discussion Partisan Cycles

Other empirical studies of RPT report more mixed results. Sheffrin (1989), for example, finds US monetary cycles, but not significantly consistent with RPT in the USA or elsewhere. Using over 100 years of American data, Klein (1996) finds political events associated with ends of slumps and booms, co...

Two Views Of Economic Voting Prospective And Retrospective

Macroeconomic voting divides naturally into two main views defined by voters’ time horizons: prospective and retrospective. In the prospective view, the expected future relative performance of contestants for office is all that matters. Prospective valuation is akin to the pricing of financial ass...

The International Political Economy Of Exchange Rate Policy