When all is said and done: updating “Elections, special interests, and financial crisis”

Abstract

How do elections affect the costliness of financial crises to taxpayers? Previous research contends that more electorally competitive countries choose policies that are less costly to taxpayers. In this paper, we update Keefer’s seminal 2007 article published in International Organization with revised data. The original article found that more electorally competitive countries had lower fiscal costs from responding to crises. The commonly used IMF/World Bank data set Keefer employed has since been extensively corrected and expanded. We update the original analysis with the newest version of this data set. After doing so, we find no evidence for an association between electoral competitiveness and the fiscal costs of responding to financial crises both within the original sample and outside of it. Our update highlights a broader methodological lesson: that the costs of responding to financial crises can take many years to be settled. Future research should explicitly address and model this delayed cost resolution.