Working paper

Economía Política

Jon H. Fiva, Gisle James Natvik

2009/36: Do re-election probabilities influence public investment?

We identify exogenous variation in incumbent policymakers’ re-election probabilities and explore empirically how this variation affects their investments in physical capital. Our results indicate that a higher re-election probability leads to higher investments, particularly in the purposes preferred more strongly by the incumbents. This aligns with a theoretical framework where political parties disagree about which public goods to produce using labor and predetermined public capital.