Do Re-election Probabilities Influence Public Investment?

Jon H. Fiva and Gisle James Natvik

Memo 16/2009

Last ned memo

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.

Published June 20, 2014 11:30 AM - Last modified Jan. 24, 2019 11:43 AM