Transparency, Political Polarization, and Political Budget Cycles in OECD Countries


  • The topic of the article came up in conversations with Guido Tabellini. We thank him, Allen Drazen, Rob Franzese, Shanna Rose and seminar participants at University of Copenhagen, EEA and Juan March Institute (Madrid), and Harvard University for comments and suggestions. Further, we thank Sona Nadenichek Golder for access to her data on political polarization. Work on the article was begun when Lassen was visiting CBRSS at Harvard University. He thanks them for their hospitality and gratefully acknowledges funding through an EPRU-network grant. The activities of EPRU are financed through a grant from the Danish National Research Foundation.

James E. Alt is Frank G. Thomson professor of government, Harvard University, 1737 Cambridge Street, N-307, Cambridge, MA 02138 ( David Dreyer Lassen is associate professor of economics, University of Copenhagen, Studiestræde 6, DK-1455 Copenhagen K, Denmark (


We investigate the effects of fiscal transparency and political polarization on the prevalence of electoral cycles in fiscal balance. While some recent political economy literature on electoral cycles identifies such cycles mainly in weak and recent democracies, in contrast we show, conditioning on a new index of institutional fiscal transparency, that electoral cycles in fiscal balance are a feature of many advanced industrialized economies. Using a sample of 19 OECD countries in the 1990s, we identify a persistent pattern of electoral cycles in low(er) transparency countries, while no such cycles can be observed in high(er) transparency countries. Furthermore, we find, in accordance with recent theory, that electoral cycles are larger in politically more polarized countries.