Scandinavian Working Papers in Economics
Memorandum,
Oslo University, Department of Economics
No 16/2009: Do Re-election Probabilities Influence Public Investment?
Jon H. Fiva () and Gisle James Natvik ()
Additional contact information
Jon H. Fiva: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Gisle James Natvik: Norges Bank
Abstract: We identify exogenous variation in incumbent policymakers’ re-election probabilities and explore empirically how this variation affects the incumbents’ investment in physical capital. Our results indicate that a higher re-election probability leads to higher investments, particularly in the purposes preferred more strongly by the incumbents. This aligns with a theoretical framework where political parties disagree about which public goods to produce using labor and predetermined public capital. Key for the consistency between data and theory is to account for complementarity between physical capital and flow variables in government production.
Keywords: Political Economics; Strategic Capital Accumulation; Identifying Popularity Shocks
49 pages, August 15, 2009
Full text files
Memo-16-2009.pdf
- Fortchoming as
- Jon H. Fiva and Gisle James Natvik, 'Do Re-election Probabilities Influence Public Investment?', Public Choice
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