A central component of representative democracy, competitive elections imply that political incumbents face uncertainty about being re-elected into office. This study jointly considers two types of opportunistic behavior that may be triggered by such uncertainty—policy myopia and policy moderation—which hitherto have been the focus of separate research traditions. Disentangling the two behaviors theoretically and empirically, we evaluate their prevalence in economic policy-making among Swedish local governments. To this end, we apply a new measure of electoral competitiveness that captures the incumbent government’s re-election probability, for which plausibly exogenous variation is generated by exploiting national-level vote intention polls. We find a substantial moderating effect of competitiveness on incumbents’ tax rate decisions—shifting policy towards the median voter—but little evidence of policy myopia. Further corroborated by original survey evidence on politicians’ perceptions of their re-election prospects and opportunistic policy options, these findings challenge the widespread notion that electoral opportunism is inherently short-sighted.
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