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The December effect in Swedish Public Finances

Dobson, Johannes LU (2026) NEKH02 20261
Department of Economics
Abstract (Swedish)
This paper examines whether a “December effect” exists in Swedish public finances, defined as a systematic increase in government expenditure at the end of the fiscal year. The analysis is motivated by the literature on “use-it-or-lose-it” incentives, where government agencies may face incentives to exhaust allocated budgets in order to avoid reductions in future appropriations. Using monthly panel data for 291 Swedish government agencies over the period 2006–2025, the paper estimates fixed effects regression models to examine seasonal expenditure patterns and the role of macroeconomic conditions. The empirical analysis provides strong evidence of a substantial and statistically significant increase in spending growth in December relative... (More)
This paper examines whether a “December effect” exists in Swedish public finances, defined as a systematic increase in government expenditure at the end of the fiscal year. The analysis is motivated by the literature on “use-it-or-lose-it” incentives, where government agencies may face incentives to exhaust allocated budgets in order to avoid reductions in future appropriations. Using monthly panel data for 291 Swedish government agencies over the period 2006–2025, the paper estimates fixed effects regression models to examine seasonal expenditure patterns and the role of macroeconomic conditions. The empirical analysis provides strong evidence of a substantial and statistically significant increase in spending growth in December relative to other months. The analysis further reveals substantial heterogeneity across agencies and sectors. In particular, higher education and research institutions exhibit especially strong end of year spending patterns, consistent with greater budget flexibility and project-based funding structures. Overall, the results suggest that institutional budgeting rules play an important role in shaping expenditure timing in Swedish public finances. The findings contribute new evidence on end of year expenditure distortions in a European public sector context. (Less)
Please use this url to cite or link to this publication:
author
Dobson, Johannes LU
supervisor
organization
course
NEKH02 20261
year
type
M2 - Bachelor Degree
subject
keywords
Public expenditure, Government agencies, state budget, Government finances
language
English
id
9233848
date added to LUP
2026-10-12 09:30:10
date last changed
2026-10-12 09:30:10
@misc{9233848,
  abstract     = {{This paper examines whether a “December effect” exists in Swedish public finances, defined as a systematic increase in government expenditure at the end of the fiscal year. The analysis is motivated by the literature on “use-it-or-lose-it” incentives, where government agencies may face incentives to exhaust allocated budgets in order to avoid reductions in future appropriations. Using monthly panel data for 291 Swedish government agencies over the period 2006–2025, the paper estimates fixed effects regression models to examine seasonal expenditure patterns and the role of macroeconomic conditions. The empirical analysis provides strong evidence of a substantial and statistically significant increase in spending growth in December relative to other months. The analysis further reveals substantial heterogeneity across agencies and sectors. In particular, higher education and research institutions exhibit especially strong end of year spending patterns, consistent with greater budget flexibility and project-based funding structures. Overall, the results suggest that institutional budgeting rules play an important role in shaping expenditure timing in Swedish public finances. The findings contribute new evidence on end of year expenditure distortions in a European public sector context.}},
  author       = {{Dobson, Johannes}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The December effect in Swedish Public Finances}},
  year         = {{2026}},
}