Fiscal forecast manipulations and electoral results: evidence from Portuguese municipalities

Abstract

This article aims to evaluate the impact of budget forecast manipulations on election results using a sample that covers all 308 Portuguese municipalities over the period running from 1998 to 2017. The results reveal that incumbent mayors overestimate revenues and expenditures. Overstating the budget more on the revenue side, they end up with a deficit. We check if this opportunistic behaviour is electorally beneficial. The results provide little or no evidence that election-year manipulations of revenue forecasts affect the vote shares of the party of the incumbent mayor. On the other hand, the opportunistic management of total and capital expenditure forecasts pays off, which is consistent with previous results for Portugal indicating that increased total and, mainly, capital expenditures lead to higher vote shares.