Reelection, growth and public debt

Ohad Raveh*, Yacov Tsur

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

8 Scopus citations

Abstract

In this work we examine how economic growth affects public debt when interacted with reelection prospects. Reelection considerations shorten political time horizons and give rise to political myopia that exacerbates debt accumulation. That laxer institutional reelection restrictions (e.g., no term limits) mitigate this effect due to electoral accountability is well known. Incorporating growth, we find that this mitigation can be reversed because less myopic, and more accountable, incumbents put more emphasis on smoothing the effects of growth across generations. We test these predictions using an annual-based panel of U.S. states over the period 1963–2010. Our identification strategy rests on constitutionally-entrenched differences in gubernatorial term limits that provide plausibly exogenous variation in reelection prospects, and aggregate national TFP shocks that are exogenous to individual states. Our estimates indicate that when reelection is possible a one standard deviation positive income shock induces, within the same year, a relative increase of approximately $40 in real per capita public debt.

Original languageAmerican English
Article number101889
JournalEuropean Journal of Political Economy
Volume63
DOIs
StatePublished - Jun 2020

Bibliographical note

Publisher Copyright:
© 2020 Elsevier B.V.

Keywords

  • Economic growth
  • Electoral accountability
  • Political myopia
  • Public debt
  • Reelection prospects

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