Fiscal conservatism in a new democracy: 'sophisticated' versus 'naive' voters

Abstract

We use data from gubernatorial elections in Brazil to test the electoral reactions of 'sophisticated' and ''naive' voters to fiscal surpluses. Our results complement Brender and Drazen [Brender, Adi, and Drazen, A., (2005b), 'How do budget deficits and economic growth affect reelection prospects? Evidence from a large cross-section of countries', NBER Working Paper 11862, National Bureau of Economic Research, Cambridge, Massachusetts]: we find no evidence of fiscal illusion while, in some cases, a fiscal surplus may actually increase the probability of reelection. (c) 2008 Elsevier B.V. All rights reserved.