Reproducibility package for Fiscal Multipliers Of Government Health And Education Expenditures: Evidence From Electoral Budget Cycles

We estimate the fiscal multiplier of government health and education expenditures—often classified as merit goods—in developing countries. We propose a novel identification strategy that exploits two features of the budget process and electoral environment: (1) approved budget allocations are legislated before the fiscal year begins and, given the multi-year nature of health and education programs, reflect planning decisions taken well in advance of contemporaneous output shocks, and (2) constitutionally predetermined electoral timing generates well-documented political incentives for incumbent governments to increase and accelerate the execution of planned budgets in visible sectors like health and education ahead of elections. Our instrument therefore interacts predetermined budget allocations with electoral cycle timing to isolate electorally driven merit goods spending. We find robust and reasonably precisely estimated merit goods multipliers of around 2. Multipliers are larger in recessions, supporting health and education spending as effective countercyclical fiscal tools. Furthermore, multipliers are larger where shares of merit goods spending in output are low, which reflects stronger stimulative effects where unmet needs are greatest. Additionally, better institutions, proxied by control of corruption, condition the size of the multiplier. These findings suggest that government spending on health and education can yield a dual dividend, boosting economic activity even before their well-known longer-term productivity gains of a healthier and more educated population materialize.