Electoral manipulation via voter-friendly spending: Theory and evidence

We present a model of the political budget cycle in which incumbents try to influence voters by changing the composition of government spending, rather than overall spending or revenues. Rational voters may support an incumbent who targets them with spending before the election even though such spending may be due to opportunistic manipulation, because it may also reflect sincere preference of the incumbent for types of spending voters favor. Classifying expenditures into those which are likely targeted to voters and those that are not, we provide evidence supporting our model in data on local public finances for all Colombian municipalities. Our findings indicate both a pre-electoral increase in targeted expenditures, combined with a contraction of other types of expenditure, and a voter response to targeting. (C) 2009 Elsevier B.V. All rights reserved.