Political Business Cycles and Corruption - Is There a Connection?

Abstract

Before elections, incumbent may engage in expansionary fiscal policies, to improve economic performance, and attract the support of the electorate, creating thus Political Business Cycles. Another reason why the incumbent may increase public expenditures before elections in countries characterized by high levels of corruption, is to increase corruption income pool. When electorate is critical against corruption, and the incumbent foresees high likelihood of re-election, the primary reason behind increased public expenditures, might be to improve economic performance, to please the voters, whereas, if the incumbent foresees loosing the elections, the primary reason for increasing public expenditures before elections might be to increase (corruption) income.