Political business cycles and Russian elections, or the manipulations of 'Chudar'

British Journal of Political Science

Volumn 31, Issue 2, 2001, Pages 225-246

  Treisman, Daniel ^a   Gimpelson, Vladimir ^b  

^a UNIVERSITY OF CALIFORNIA   (United States)

^b PRIMAKOV NATIONAL RESEARCH INSTITUTE OF WORLD ECONOMY AND INTERNATIONAL RELATIONS   (Russian Federation)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0035644275     PISSN: 00071234     EISSN: None     Source Type: Journal    
DOI: 10.1017/S0007123401000096     Document Type: Article

References (59)

1. William Nordhaus, 'The Political Business Cycle', Review of Economic Studies, 42 (1975), 169-90.
2. K. Rogoff and A. Sibert, 'Elections and Macroeconomic Policy Cycles', Review of Economic Studies, 55 (1988), 1-16; T. Persson and G. Tabellini, Macroeconomic Policy, Credibility, and Politics (Chur, Switzerland: Harwood Academic Publishers, 1990).
3. K. Rogoff and A. Sibert, 'Elections and Macroeconomic Policy Cycles', Review of Economic Studies, 55 (1988), 1-16; T. Persson and G. Tabellini, Macroeconomic Policy, Credibility, and Politics (Chur, Switzerland: Harwood Academic Publishers, 1990).
4. Douglas Hibbs, 'Political Parties and Macroeconomic Policy', American Political Science Review, 71 (1977), 1467-87.
5. James E. Alt, 'Employment versus Inflation: Party Ideology, Information and International Trade', in Ian Budge and David McKay, eds, Developing Democracy (London: Sage, 1994), p. 99.
6. Alberto Alesina, Nouriel Roubini, with Gerald D. Cohen, Political Cycles and the Macroeconomy (Cambridge, Mass: MIT Press, 1997, p. 254.
7. Karen L. Remmer, 'The Political Economy of Elections in Latin America, 1980-91', American Political Science Review, 87 (1993), 393-407.
8. Kenneth A. Schultz, 'The Politics of the Political Business Cycle', British Journal of Political Science, 25 (1995), 79-99.
9. Simon Price, 'Comment on "The Politics of the Political Business Cycle"', British Journal of Political Science, 28 (1998) 201-10.
10. William Clark and Mark Hallerberg, 'Mobile Capital, Domestic Institutions, and Electorally-Induced Monetary and Fiscal Policy' (unpublished paper, Georgia Institute of Technology, June 1998); Alesina et al., Political Cycles and the Macroeconomy, fn.5.
11. William Clark and Mark Hallerberg, 'Mobile Capital, Domestic Institutions, and Electorally-Induced Monetary and Fiscal Policy' (unpublished paper, Georgia Institute of Technology, June 1998); Alesina et al., Political Cycles and the Macroeconomy, fn.5.
12. To assume that policy makers choose a portfolio of revenue-raising methods that equates the marginal cost of each is, of course, the central insight of optimal taxation theory (see, for instance, Robert Barro. 'On the Determination of the Public Debt', Journal of Political Economy, 87 (1979) 940-71).
13. We do not attempt to prove anything here about the effect of policies on voting. Rather, we focus on illustrating that actual policy was indeed similar to that which might have been expected from a rational manipulator of opportunistic political business cycles.
14. Daniel Treisman, 'Dollars and Democratization: The Role and Power of Money in Russia's Transitional Elections', Comparative Politics, November 1998, and 'Why Yeltsin Won,' Foreign Affairs, September-October, 1996; Michael McFaul, Russia 's 1996 Presidential Election (Stanford, Calif.: Hoover Institution Press, 1997).
15. Daniel Treisman, 'Dollars and Democratization: The Role and Power of Money in Russia's Transitional Elections', Comparative Politics, November 1998, and 'Why Yeltsin Won,' Foreign Affairs, September-October, 1996; Michael McFaul, Russia 's 1996 Presidential Election (Stanford, Calif.: Hoover Institution Press, 1997).
16. Daniel Treisman, 'Dollars and Democratization: The Role and Power of Money in Russia's Transitional Elections', Comparative Politics, November 1998, and 'Why Yeltsin Won,' Foreign Affairs, September-October, 1996; Michael McFaul, Russia 's 1996 Presidential Election (Stanford, Calif.: Hoover Institution Press, 1997).
17. Daniel Treisman, After the Deluge: Regional Crises and Political Consolidation in Russia (Ann Arbor: University of Michigan Press, 1999), chap. 4; Timothy J. Colton, Transitional Citizenship: Voting in Post-Soviet Russia (Cambridge, Mass.: Harvard University Press, Forthcoming).
18. Daniel Treisman, After the Deluge: Regional Crises and Political Consolidation in Russia (Ann Arbor: University of Michigan Press, 1999), chap. 4; Timothy J. Colton, Transitional Citizenship: Voting in Post-Soviet Russia (Cambridge, Mass.: Harvard University Press, Forthcoming).
19. Stephen White, Richard Rose and Ian McAllister, How Russia Votes (Chatham, NJ: Chatham House, 1996); McFaul, Russia's 1996 Presidential Election, p. 7, fn. 13.
20. Stephen White, Richard Rose and Ian McAllister, How Russia Votes (Chatham, NJ: Chatham House, 1996); McFaul, Russia's 1996 Presidential Election, p. 7, fn. 13.
21. Opinion polls clearly indicate the high public salience of inflation during this period. In March 1993, 84 per cent of respondents said they were worried by inflation, dropping gradually to 68 per cent in May 1996, still a remarkably high figure (see VCIOM, Economic and Social Change: Public Opinion Monitoring: Bulletin of Information, various issues (1991-97)).
22. To Russian-speakers, the word chudar may also suggest the meaning 'magician' or 'miracle-worker', derived from chudo, a miracle.
23. See, for instance, Timothy J. Colton and Jerry Hough, eds, Growing Pains: Russian Democracy and the Election of 1993 (Washington, DC: Brookings Institution, 1998).
24. Some evidence suggests that in Russia during this period lower poverty correlated over time with lower inflation; see B. Granville, J. Shapiro and O. Dynnikova, 'Chem nizhe inflatsiya, tem menshe bednost: pervye resultaty dlya Rossii' (Less Inflation, Less Poverty: First Results for Russia), in A. Aslund and M. Dmitriev, eds, Sotsialnaya politika v period perekhoda k rynku: problemy i resheniya (Moscow: Carnegie Center, 1997).
25. For instance, in early 1995 with no election in sight, the government vigorously opposed parliamentary plans to increase the minimum wage, and President Yeltsin exercised his veto, before finally compromising with the Duma in April (OMRI Daily Digest, 13 February 1995). By later in the year, with the parliamentary election looming, Prime Minister Viktor Chernomyrdin was actually proposing increases - first one from August and then an increase to the pension from November (OMRI Daily Digest, 20 July 1995 and 16 October 1995).
26. For instance, in early 1995 with no election in sight, the government vigorously opposed parliamentary plans to increase the minimum wage, and President Yeltsin exercised his veto, before finally compromising with the Duma in April (OMRI Daily Digest, 13 February 1995). By later in the year, with the parliamentary election looming, Prime Minister Viktor Chernomyrdin was actually proposing increases - first one from August and then an increase to the pension from November (OMRI Daily Digest, 20 July 1995 and 16 October 1995).
27. Higher interest rates might also have helped to support the currency, which would have kept import prices stable.
28. In addition, the falling effectiveness of tax administration restricted this option; see Daniel Treisman, 'Russia's Taxing Problem', Foreign Policy, September 1998.
29. The controversial 'loans-for-shares' auctions in late 1995 were viewed by many observers at the time as a means by which the government raised cash to fund popular spending programmes during the presidential campaign of 1996.
30. In Russia, the inflationary kick tended to come about 3-6 months after the increase in the money supply, leaving a short window of opportunity for pre-election monetary finance.
31. In a 20 March 1993 television address, Yeltsin declared that he was imposing a 'special form of administration'. The parliament responded with an attempt to impeach him on 26 March, an attempt which failed. The two sides then compromised on holding the 25 April referendum.
32. President Yeltsin had dissolved parliament on 21 September, provoking a stand-off when deputies refused to leave the building. Only after this ended with the military storming of the White House on 3-4 October did it become clear that the new elections would be held. They took place on 12 December 1993.
33. The procedure used, based on those presented by Gourieroux and Monfort, is described in the Appendix (Christian Gourieroux and Alain Monfort, Time Series and Dynamic Models (New York: Cambridge University Press, 1997)).
34. In the last case, data were not available for March-April 1993.
35. Because the post-election inflation burst hypothesis did not coincide temporally with the pre-election periods, it was not clear how this could be included in the test.
36. Durbin-Watson statistics for regressions of the seasonally adjusted indicators on just an intercept ranged from 1.16 to 2.79.
37. In the latter case, we excluded from the data all observations for other pre-electoral periods.
38. Though the importance of the aid of big business and the advertising campaign it helped put together in swinging the vote to Yeltsin is generally taken for granted, its significance can be questioned. According to one representative nationwide survey, 80 per cent of voters had already made up their minds by one month before the election, the point at which the advertising campaign began in earnest (Colton, Transitional Citizenship, fn. 13). See also Treisman, 'Dollars and Democratization', fn. 12.
39. Though the importance of the aid of big business and the advertising campaign it helped put together in swinging the vote to Yeltsin is generally taken for granted, its significance can be questioned. According to one representative nationwide survey, 80 per cent of voters had already made up their minds by one month before the election, the point at which the advertising campaign began in earnest (Colton, Transitional Citizenship, fn. 13). See also Treisman, 'Dollars and Democratization', fn. 12.
40. Treisman argues that the extremely high rates on treasury bills created by protecting the infant market from foreign investors until late 1996 helped to buy the support for macroeconomic stabilization of banks that had previously been profiting from inflation. See Daniel Treisman, 'Fighting Inflation in a Transitional Order: Russia's Anomalous Stabilization', World Politics, January 1998.
41. OECD, Economic Survey of the Russian Federation (Paris: OECD, 1997), p. 139.
42. Including the border months.
43. The minimum wage was increased in April 1993; December 1993; August, November and December 1995; as well as January and April 1996. Interestingly, the minimum wage was also raised in May 1991, right before the first Russian presidential election.
44. RFE/RL Newsline, No. 73, 19 April 1993.
45. OMRI Daily Digest, 26 September 1995.
46. Russian Economic Trends. 3 (1997), p. 52.
47. See J. Earle and K. Sabirianova, 'Wage Arrears in Russia: An Exploration of Causes and Consequences' (unpublished paper, SITE, Stockholm, 1998); H. Lehmann, J. Wadsworth and A. Acquisti, 'Grime and Punishment: Employment, Wages and Wage Arrears in the Russian Federation' (paper prepared for the conference 'Labor Markets in Transition', University of Michigan, Ann Arbor, October 1997); Vladimir Gimpelson, 'Politics of Labor Market Adjustment' (discussion paper, Collegium Budapest, Budapest 1998); Padma Desai and Todd Idson, 'The Wage Arrears Crisis in Russia' (unpublished paper, Columbia University, 1997).
48. See J. Earle and K. Sabirianova, 'Wage Arrears in Russia: An Exploration of Causes and Consequences' (unpublished paper, SITE, Stockholm, 1998); H. Lehmann, J. Wadsworth and A. Acquisti, 'Grime and Punishment: Employment, Wages and Wage Arrears in the Russian Federation' (paper prepared for the conference 'Labor Markets in Transition', University of Michigan, Ann Arbor, October 1997); Vladimir Gimpelson, 'Politics of Labor Market Adjustment' (discussion paper, Collegium Budapest, Budapest 1998); Padma Desai and Todd Idson, 'The Wage Arrears Crisis in Russia' (unpublished paper, Columbia University, 1997).
49. See J. Earle and K. Sabirianova, 'Wage Arrears in Russia: An Exploration of Causes and Consequences' (unpublished paper, SITE, Stockholm, 1998); H. Lehmann, J. Wadsworth and A. Acquisti, 'Grime and Punishment: Employment, Wages and Wage Arrears in the Russian Federation' (paper prepared for the conference 'Labor Markets in Transition', University of Michigan, Ann Arbor, October 1997); Vladimir Gimpelson, 'Politics of Labor Market Adjustment' (discussion paper, Collegium Budapest, Budapest 1998); Padma Desai and Todd Idson, 'The Wage Arrears Crisis in Russia' (unpublished paper, Columbia University, 1997).
50. See J. Earle and K. Sabirianova, 'Wage Arrears in Russia: An Exploration of Causes and Consequences' (unpublished paper, SITE, Stockholm, 1998); H. Lehmann, J. Wadsworth and A. Acquisti, 'Grime and Punishment: Employment, Wages and Wage Arrears in the Russian Federation' (paper prepared for the conference 'Labor Markets in Transition', University of Michigan, Ann Arbor, October 1997); Vladimir Gimpelson, 'Politics of Labor Market Adjustment' (discussion paper, Collegium Budapest, Budapest 1998); Padma Desai and Todd Idson, 'The Wage Arrears Crisis in Russia' (unpublished paper, Columbia University, 1997).
51. They continued to grow in 1997-98, increasing the pressure on public finance and politics.
52. Data on these were only available from 1996, so they could not be included in the statistical analysis. But Figure 2 shows that in that year they fit the political business cycle expectation perfectly. A sharp upward trend is visible throughout the year. But between March and June 1996 - the peak months of the presidential campaign - a large bite has been taken out of the hillside.
53. OMRI Daily Digest, 11 September 1995.
54. OMRI Daily Digest, 19 October 1995.
55. See McFaul, Russia's 1996 Presidential Election; Daniel Treisman, 'Why Yeltsin Won', Foreign Affairs, September 1996.
56. See McFaul, Russia's 1996 Presidential Election; Daniel Treisman, 'Why Yeltsin Won', Foreign Affairs, September 1996.
57. OMRI Daily Digest, 30 October 1995, 3 November 1995 and 20 November 1995.
58. RFE/RL Newsline, 70, 14 April 1993.
59. Daniel Treisman, After the Deluge: Regional Crises and Political Consolidation (Ann Arbor: University of Michigan Press, 1999).