Political Budget Cycles In Municipalities: Evidence From Indonesia

This study aims to examine the presence of politically induced and electorally motivated economic policy in local government budget. Further, the study examine the presence of pre-electoral manipulation through the behavior of budget balance, total expenditures, investment expenditures, and other administrative expenditures including donations, social assistance, and financial assistance expenditure during election year. Samples of the study consists of 451 district municipalities in Indonesia which held direct local elections over the period 2010-2014. The result of the study shows an opportunistic PBC pattern in the budget balance, total expenditures, donation expenditures, and financial assistance expenditures. The result suggest that there is an increase in local budget deficit in election years.Total expenditures also seem to increase duringthe election year, along with donation and financial assistance expenditures. This result supports the notion that elections have a positive effect on the government expenditures through the increase of municipal expenditures, especially expenditures thatare highly visible to electorate.