New model suggests Cabinet Expectations shape fiscal behavior.
- Problem: Standard political budget cycle models assume fixed election timing.
- Solution: This research introduces a revised framework allowing cabinets to anticipate their tenure length. Cabinets then strategically adjust spending based on these predictions.
Key Findings:
- Longevity Expectations: Governments spend more as their predicted term ends, regardless of actual duration.
- Surprise Survival: Cabinets that unexpectedly survive beyond projections run larger deficits later.
Empirical Evidence: Data from 15 European democracies over multiple decades confirms these patterns. Spending increases align with waning expected cabinet life, and deficits rise when cabinets outlive predictions.
Broader Implications: This nuanced understanding reveals how beliefs about political survival influence budgetary decisions in parliamentary systems.
