Abstract

RUBIANO PAEZ, Néstor. POLITICAL BUSINESS CYCLE AND SYZE OF TOWNS: COLOMBIA 1989-2008. Rev.econ.inst. [online]. 2011, vol.13, n.25, pp.105-136. ISSN 0124-5996.

This paper presents an empirical verification of the "political business cycle" hipotheses applied to 547 Colombian municipalities from 1989 to 2008. The econometric study reveals that smaller towns exhibit a cycle in public investment and fiscal deficit: both variables increase before elections and fall after them. These results are placed in the Colombian social context to discuss why the cycle occurs in those municipalities and the coincidence with differences in the efficiency of public expenditure to reduce poverty, as measured by unsatisfied basic needs. Some policies are recommended in order to reduce the adverse effects of this cycle and improve efficiency.

Keywords : political economy; political business cycle; political budget cycle; local public finance; Colombia.

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