Local Political Business Cycles and Administration Spending in Polish Local Governments

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Subject and purpose of work: The purpose of this article is to verify the hypothesis of the occurrence of political business cycles at the self-governmental level in Poland.

Materials and methods: The article presents a quantitative analysis of expenditures on remuneration in the administration of Polish self-governments at the county (district) level (in the period 2007–2018) and at province (regional) level (in the period 1999–2018) with the use of Arellano-Bond and LSDVC estimators.

Results: The panel data analysis makes it possible to conclude that in Polish self-governments cyclical fluctuations of expenditure on remuneration can be observed. The increase in salaries depends on the power of the ruling coalition as well as unemployment and the output gap in a region. In the case of provinces and counties, also the increase of investment expenditures significantly affects the increase of salaries.

Conclusions: The results of the estimation of models clearly point to the presence of cyclical distortions in remuneration in public administration, which are caused by the upcoming elections.

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