Strategic use of expenditures to stay in oce

As the scal system becomes more transparent, recent literature has found greater prevalence of the manipulation of the composition of expenditures rather than of aggregate spending. However, the empir- ical analysis with the incumbents' heterogeneous preference about the composition has not been implemented. This paper is aimed at nd-ing empirical evidence for manipulation of composition and providing the theoretical explanation. It nds that incumbents would increase expenditures in their less-preferred categories when they face a neg-ative exogenous shock, which reduces their chance of winning. This phenomenon would be still explained when rational voters know the magnitude of exogenous shock.