Political budget cycles and divided government
Political budget cycles and divided government. Regional Studies. This study empirically examines the effect of divided governments on the existence of political budget cycles. It uses a setting at the German municipality level, where divided governments occur frequently and can be clearly disentangled from the underlying political system. In this setting, the executive does not have full discretion over expenditures and tax rates, and needs support from the legislative to manipulate policy before executive elections. The study shows that political budget cycles in expenditures and tax rates are more likely when the same party controls executive and legislative. Under divided government, policy manipulation is significantly smaller.