David Fortunato and Matt W.Loftis In reality,elections are not fixed in the overwhelm- means certain and.in fact,it is the exception rather than ing majority of parliamentary democracies and only the rule. a very small minority of elections could be described We assume cabinet dissolution is stochastic and as strategically timed or"opportunistic"(Schleiter and model government spending accordingly as a func- Tavits 2016).Indeed,an accounting of over 608 Euro tion of the cabinet's electoral expectations-when it pean governments by Seki and Williams(2014)reveals believes the next election will occur either as a result that at least 62%of cabinets terminate in conditions of expiration of the constitutional interrelation period that are not constitutionally mandated elections and (CIEP)or premature dissolution(from here on we use are extraordinarily unlikely to be the product of strate- the words election and dissolution interchangeably)o gic electoral timing-the resignation of the prime min- That is,we assume that governments form beliefs over ister(for health reasons or otherwise),internal dissent their durability and grow public spending accordingly. or loss of parliamentary support.In other words,well If we believe that governments have a preference for over half of all European governments violate the stan- fiscal discipline,all else equal,then this implies a nega- dard assumptions of the extant PBC literature.Gov- tive relationship between expectations of cabinet dura- ernment survivability in parliamentary democracies is bility and public spending.Cabinets should spend less inherently uncertain and,as such,we cannot presume when elections are believed to be distant and spend the timing of elections to be fixed,nor can we assume more when elections are believed to be proximate to the timing is purely a function of the cabinet's tastes.s stimulate electoral support without running burden- Our framework relaxes these assumptions by building some deficits. a model of public spending that incorporates the cabi- Borrowing from Alt and Lassen (2006),a stylized net's expectations for dissolution.More specifically,we representation of this expectation is given in the left construct a predicted duration for each cabinet in our pane of Figure 1 with the x-axis representing the cab- data based upon its observable characteristics at for- inet's life expectancy and the y-axis representing pub- 令 mation and estimate the effect of the cabinet's life ex- lic spending.As the government's expected dissolution 4号 pectancy on its spending choices. point approaches (indicated by the 0 hash on the x- axis),it increases spending to engender electoral sup- DURABILITY AND SPENDING port.After the election,the government(whether or & not the incumbent has returned)lowers spending and As is common in the literature,we make the follow- the cycle begins again.To reiterate:when governments ing assumptions:(1)incumbent governments wish to believe that elections are distant,public spending is be reelected:(2)voters are retrospective,making eval- more modest.When governments believe that elec- uations on the policy outcomes they have recently ob- tions are approaching,however,they begin to spend served but not factoring in the future repercussions of more boldly in an effort to stimulate electoral support these policy choices;and(3)governments believe that This is the central hypothesis that we test below.1 increasing public expenditures will demonstrate com- Thinking of dissolutions as stochastic and public petence by stimulating growth,satiating the spending spending as a function of forecasted durations raises demands of their supporters,or otherwise.The impli- a follow-up question:What happens when the cabi- cation of these assumptions is that governments will net's prediction is wrong-either too generous or too S5.501g increase spending as elections approach to stimulate miserly-by some significant margin?To the former. electoral support.Setting aside,for the moment,the when a cabinet forecasts a duration that is too long and possibility of opportunistic early elections,if we were terminates earlier than expected,it should lose votes to assume that the timing of the election is fixed and In this case,the premature termination would preclude known,our expectation would be higher spending in the government from ramping up spending to stimu- (pre)election years and lower spending in postelection late support and,as a result,its electoral performance years,all else equal,just as those that have preceded us should suffer.This prediction is supported by the ex- have predicted (Alt and Lassen 2006;Rose 2006,etc.). tant literature on electoral timing and success.For ex- However,in the parliamentary democracies that we are ample,Smith(2003)presents compelling evidence that interested in here,the survival of the government un- til the next constitutionally mandated contest is by no 0 Astute readers realize that dissolution does not trigger immediate elections in all cases and,on occasion,a dissolved cabinet may remain in government as "caretaker"until elections can be held.We main- tain that caretaker cabinets are most often charged as custodians s For clarity,in our sample,nearly 75%of cabinets terminate over simply there to shepherd the country to their next cabinet.However. one month before their possible tenure expires and over 60%termi- this is not always the case as Laver and Shepsle(1994)point out,thus nate over six months before their possible tenure expires. we attempt to account for the time caretakers spend in office in our How voters are assumed to generate their expectations for future performance,whether rationally or adaptively,has been a subject of Previouseaders of the manuscript have asked why goverments debate in the PBC literature-we suggest Alt and Lassen (2006)and do not simply wait until the cabinet has dissolved and then spend Clark et al.(1998)for concise reviews.We believe that our assump- prodigiously until the election.Our response is that the gears of gov- tion of a retrospective voter (adaptive expectations)is a better match ernment grind slowly-meaning that governments are likely inca- to what we have learned from the economic voting lterature,not pable of revving up spending overnight-and the effects of spend- only about vote choices per se,but also the structure of economic ex- ing require some time to take effect and to be observed by the elec- pectations and retrospections and the relative weight of recent(quite torate.These factors,combined with constitutional limitations on the high)and distant (quite low)outcomes in determining them (e.g. amount of time between dissolutions and elections make forecasting Duch and Stevenson 2010,2011;Healy and Lenz 2014). and proactive adjustments essential 942David Fortunato and Matt W. Loftis In reality, elections are not fixed in the overwhelm￾ing majority of parliamentary democracies and only a very small minority of elections could be described as strategically timed or “opportunistic” (Schleiter and Tavits 2016). Indeed, an accounting of over 608 Euro￾pean governments by Seki and Williams (2014) reveals that at least 62% of cabinets terminate in conditions that are not constitutionally mandated elections and are extraordinarily unlikely to be the product of strate￾gic electoral timing—the resignation of the prime min￾ister (for health reasons or otherwise), internal dissent, or loss of parliamentary support. In other words, well over half of all European governments violate the stan￾dard assumptions of the extant PBC literature. Gov￾ernment survivability in parliamentary democracies is inherently uncertain and, as such, we cannot presume the timing of elections to be fixed, nor can we assume the timing is purely a function of the cabinet’s tastes.8 Our framework relaxes these assumptions by building a model of public spending that incorporates the cabi￾net’s expectations for dissolution. More specifically, we construct a predicted duration for each cabinet in our data based upon its observable characteristics at for￾mation and estimate the effect of the cabinet’s life ex￾pectancy on its spending choices. DURABILITY AND SPENDING As is common in the literature, we make the follow￾ing assumptions: (1) incumbent governments wish to be reelected; (2) voters are retrospective, making eval￾uations on the policy outcomes they have recently ob￾served but not factoring in the future repercussions of these policy choices;9 and (3) governments believe that increasing public expenditures will demonstrate com￾petence by stimulating growth, satiating the spending demands of their supporters, or otherwise. The impli￾cation of these assumptions is that governments will increase spending as elections approach to stimulate electoral support. Setting aside, for the moment, the possibility of opportunistic early elections, if we were to assume that the timing of the election is fixed and known, our expectation would be higher spending in (pre)election years and lower spending in postelection years, all else equal, just as those that have preceded us have predicted (Alt and Lassen 2006; Rose 2006, etc.). However,in the parliamentary democracies that we are interested in here, the survival of the government un￾til the next constitutionally mandated contest is by no 8 For clarity, in our sample, nearly 75% of cabinets terminate over one month before their possible tenure expires and over 60% termi￾nate over six months before their possible tenure expires. 9 How voters are assumed to generate their expectations for future performance, whether rationally or adaptively, has been a subject of debate in the PBC literature—we suggest Alt and Lassen (2006) and Clark et al. (1998) for concise reviews. We believe that our assump￾tion of a retrospective voter (adaptive expectations) is a better match to what we have learned from the economic voting literature, not only about vote choices per se, but also the structure of economic ex￾pectations and retrospections and the relative weight of recent (quite high) and distant (quite low) outcomes in determining them (e.g., Duch and Stevenson 2010, 2011; Healy and Lenz 2014). means certain and,in fact,it is the exception rather than the rule. We assume cabinet dissolution is stochastic and model government spending accordingly as a func￾tion of the cabinet’s electoral expectations—when it believes the next election will occur either as a result of expiration of the constitutional interrelation period (CIEP) or premature dissolution (from here on we use the words election and dissolution interchangeably).10 That is, we assume that governments form beliefs over their durability and grow public spending accordingly. If we believe that governments have a preference for fiscal discipline, all else equal, then this implies a nega￾tive relationship between expectations of cabinet dura￾bility and public spending. Cabinets should spend less when elections are believed to be distant and spend more when elections are believed to be proximate to stimulate electoral support without running burden￾some deficits. Borrowing from Alt and Lassen (2006), a stylized representation of this expectation is given in the left pane of Figure 1 with the x-axis representing the cab￾inet’s life expectancy and the y-axis representing pub￾lic spending. As the government’s expected dissolution point approaches (indicated by the 0 hash on the x￾axis), it increases spending to engender electoral sup￾port. After the election, the government (whether or not the incumbent has returned) lowers spending and the cycle begins again. To reiterate: when governments believe that elections are distant, public spending is more modest. When governments believe that elec￾tions are approaching, however, they begin to spend more boldly in an effort to stimulate electoral support. This is the central hypothesis that we test below.11 Thinking of dissolutions as stochastic and public spending as a function of forecasted durations raises a follow-up question: What happens when the cabi￾net’s prediction is wrong—either too generous or too miserly—by some significant margin? To the former, when a cabinet forecasts a duration that is too long and terminates earlier than expected, it should lose votes. In this case, the premature termination would preclude the government from ramping up spending to stimu￾late support and, as a result, its electoral performance should suffer. This prediction is supported by the ex￾tant literature on electoral timing and success. For ex￾ample, Smith (2003) presents compelling evidence that 10 Astute readers realize that dissolution does not trigger immediate elections in all cases and, on occasion, a dissolved cabinet may remain in government as “caretaker” until elections can be held. We main￾tain that caretaker cabinets are most often charged as custodians, simply there to shepherd the country to their next cabinet. However, this is not always the case as Laver and Shepsle (1994) point out, thus, we attempt to account for the time caretakers spend in office in our empirical model. 11 Previous readers of the manuscript have asked why governments do not simply wait until the cabinet has dissolved and then spend prodigiously until the election. Our response is that the gears of gov￾ernment grind slowly—meaning that governments are likely inca￾pable of revving up spending overnight—and the effects of spend￾ing require some time to take effect and to be observed by the elec￾torate. These factors, combined with constitutional limitations on the amount of time between dissolutions and elections make forecasting and proactive adjustments essential. 942 Downloaded from https://www.cambridge.org/core. Shanghai JiaoTong University, on 26 Oct 2018 at 03:53:05, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/S0003055418000436