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Fiscal Conservatism in a New Democracy: 'Sophisticated' versus 'Naïve' Voters

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  • Tavares, José
  • Arvate, Paulo
  • Avelino, George

Abstract

Several authors claim that voters in new democracies reward deficits at the polls and this fact is due to a lack of 'voter sophistication'. We test this claim for gubernatorial elections in Brazil, an important case study since it is the fourth most populous democracy in the world, displays a high variance in economic and social characteristics across states, and effectively imposes mandatory voting. Our evidence shows that voters are fiscally conservative, that is, they reward lower deficits, which is in contradiction to the literature. We do find that, when we use state income per capita, education and income inequality as proxies for 'voter sophistication', 'naïve' voters do not reward low deficits as opposed to 'sophisticated' voters, and education is the key element for this distinction. We propose that education rather than the youth of the democracy, is the key element for assessing voter 'sophistication'.

Suggested Citation

  • Tavares, José & Arvate, Paulo & Avelino, George, 2008. "Fiscal Conservatism in a New Democracy: 'Sophisticated' versus 'Naïve' Voters," CEPR Discussion Papers 6931, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:6931
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    References listed on IDEAS

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    1. Sam Peltzman, 1992. "Voters as Fiscal Conservatives," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 327-361.
    2. Adi Brender & Allan Drazen, 2005. "How Do Budget Deficits and Economic Growth Affect Reelection Prospects? Evidence from a Large Cross-Section of Countries," NBER Working Papers 11862, National Bureau of Economic Research, Inc.
    3. William D. Nordhaus, 1975. "The Political Business Cycle," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(2), pages 169-190.
    4. Brender, Adi, 2003. "The effect of fiscal performance on local government election results in Israel: 1989-1998," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2187-2205, September.
    5. Alberto Alesina & Roberto Perotti & José Tavares, 1998. "The Political Economy of Fiscal Adjustments," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 197-266.
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    Cited by:

    1. Marcela Eslava, 2011. "The Political Economy Of Fiscal Deficits: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 25(4), pages 645-673, September.
    2. Dilla, Diana, 2017. "Staatsverschuldung und Verschuldungsmentalität [Public Debt and Debt Mentality]," MPRA Paper 79432, University Library of Munich, Germany.
    3. Paulo Arvate & Vladimir Ponczek, 2008. "Municipality secession, voter’s preference and persistence of power," Working Papers 08_07, Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto.
    4. Beata Guziejewska, 2015. "Designing A Revenue Structure In Local Self-Government Entities In Poland: Taxes Versus Grants," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 10(3), pages 45-63, September.
    5. Fabio Alvim Klein & Sergio Naruhiko Sakurai, 2016. "Term Limits And Political Budget Cycles At The Local Level: Evidence From A Young Democracy," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42nd Brazilian Economics Meeting] 052, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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    More about this item

    Keywords

    Budget deficits; Elections; Fiscal conservatism; Political cycles;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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