Political Distortions in State Forecasts

This study provides evidence that political incentives lead state budget officials to make biased forecasts. Specifically, the budget in the year that ends right before an election is based on overly optimistic forecasts. Similarly, the budget that starts right before an election is also based on op...

Full description

Saved in:
Bibliographic Details
Published in:Public choice 2008-09, Vol.136 (3/4), p.411-427
Main Author: Boylan, Richard T.
Format: Article
Language:English
Subjects:
Bias
Budget deficit
Budgets
Economic forecasting
Economic forecasts
Economics
Economics and Finance
Election forecasting
Elections
Electoral behaviour
Federal states
Forecasting
Governors
Gubernatorial elections
Incentives
Personal income
Personal income taxes
Political economy
Political Factors
Political parties
Political Science
Public budgeting
Public Debt
Public Finance
Revenue
State budgets
State elections
State income tax
Statistical forecasts
Tax increases
U.S.A
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This study provides evidence that political incentives lead state budget officials to make biased forecasts. Specifically, the budget in the year that ends right before an election is based on overly optimistic forecasts. Similarly, the budget that starts right before an election is also based on optimistic forecasts. These biases are even larger if the incumbent party is more likely to lose the gubernatorial election. Accordingly, budget deficits are $27 per capita higher in election years and $ 26 per capita higher the following year.
ISSN:0048-5829
1573-7101
DOI:10.1007/s11127-008-9303-0