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The effects of party competition on budget outcomes: Empirical evidence from local governments in Spain

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Albert Solé-Ollé ()

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Abstract

This paper investigates the link between local budget outcomes and the intensity of party competition, measured as the margin of victory obtained by the incumbent in the previous local election (i.e. the difference between the vote share and 50%). Two competing hypotheses are tested in the paper. On the one hand, the Leviathan government hypothesis suggests that the lower the intensity of party competition is, the greater is the increase in the size of the local public sector, irrespective of the ideology of the party in power. On the other hand, the Partisan government hypothesis suggests that the incumbent will find it easier to advance its platform when intensity of competition is low (i.e., parties on the left/right will increase/decrease the size of the local public sector when the intensity of the challenge from the opposition is low). These hypotheses are tested with information on spending, own revenues and deficit for more than 500 Spanish local governments over 8 years (1992–1999), and information on the results of two local electoral contests (1991 and 1995). The evidence favors the Partisan hypothesis over the Leviathan one. We found that, for left-wing governments, spending, taxes and deficits increased as the electoral margin increases; whereas, for right-wing governments, a greater margin of victory led to reductions in all these variables. Copyright Springer Science + Business Media, Inc. 2006

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File URL: http://hdl.handle.net/10.1007/s11127-006-2456-9
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Article provided by Springer in its journal Public Choice.

Volume (Year): 126 (2006)
Issue (Month): 1 (January)
Pages: 145-176
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Handle: RePEc:kap:pubcho:v:126:y:2006:i:1:p:145-176

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  1. Avinash Dixit & John Londregan, 1998. "Ideology, Tactics, And Efficiency In Redistributive Politics," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 497-529, May. [Downloadable!] (restricted)
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  2. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
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  4. Timothy Besley & Anne Case, 2003. "Political Institutions and Policy Choices: Evidence from the United States," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 7-73, March.
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  5. Bryan Caplan, 2001. "Has Leviathan Been Bound? A Theory of Imperfectly Constrained Government with Evidence from the States," Southern Economic Journal, Southern Economic Association, vol. 67(4), pages 825-847, April.
  6. Kenneth Rogoff, 1990. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Torsten Persson & Guido Tabellini, 2004. "Constitutional Rules and Fiscal Policy Outcomes," American Economic Review, American Economic Association, vol. 94(1), pages 25-45, March. [Downloadable!]
  8. Bloom, Howard S. & Ladd, Helen F., 1982. "Property tax revaluation and tax levy growth," Journal of Urban Economics, Elsevier, vol. 11(1), pages 73-84, January. [Downloadable!] (restricted)
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  10. Myerson Roger B., 1993. "Effectiveness of Electoral Systems for Reducing Government Corruption: A Game-Theoretic Analysis," Games and Economic Behavior, Elsevier, vol. 5(1), pages 118-132, January. [Downloadable!] (restricted)
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  11. Rogers, Diane Lim & Rogers, John H, 2000. " Political Competition and State Government Size: Do Tighter Elections Produce Looser Budgets?," Public Choice, Springer, vol. 105(1-2), pages 1-21, October. [Downloadable!] (restricted)
  12. Case, Anne, 2001. "Election goals and income redistribution: Recent evidence from Albania," European Economic Review, Elsevier, vol. 45(3), pages 405-423, March. [Downloadable!] (restricted)
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  13. Wittman, Donald, 1989. "Why Democracies Produce Efficient Results," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1395-1424, December. [Downloadable!] (restricted)
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  1. Giardina, Emilio & Cavalieri, Marina & Guccio, Calogero & Mazza, Isidoro, 2009. "Federalism, Party Competition and Budget Outcome: Empirical Findings on Regional Health Expenditure in Italy," MPRA Paper 16437, University Library of Munich, Germany. [Downloadable!]
  2. Albert Solé-Ollé & Pilar Sorribas-Navarro, 2008. "Does partisan alignment affect the electoral reward of intergovernmental transfers?," Working Papers 2008/2, Institut d'Economia de Barcelona (IEB). [Downloadable!]
  3. Albert Solé-Ollé & Pilar Sorribas-Navarro, 2006. "The effects of partisan alignment on the allocation of intergovernmental transfers. Differences-in-differences estimates for Spain," Working Papers 2006-09, University of Kentucky, Institute for Federalism and Intergovernmental Relations. [Downloadable!]
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  4. Núria Bosch & Albert Solé-Ollé, 2007. "Yardstick competition and the political costs of raising taxes: An empirical analysis of Spanish municipalities," International Tax and Public Finance, Springer, vol. 14(1), pages 71-92, February. [Downloadable!] (restricted)
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  5. Albert Solé-Ollé & Pilar Sorribas-Navarro, 2008. "Does Partisan Alignment Affect the Electoral Reward of Intergovernmental Transfers?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  6. Albert Solé-Ollé & Elisabet Viladecans-Marsal, 2007. "Economic and political determinants of urban expansion: Exploring the local connection," Working Papers 2007/5, Institut d'Economia de Barcelona (IEB). [Downloadable!]
  7. Áron Kiss, 2009. "Coalition politics and accountability," Public Choice, Springer, vol. 139(3), pages 413-428, June. [Downloadable!] (restricted)
  8. Ferris, J. Stephen & Park, Soo-Bin & Winer, Stanley L., 2008. "Studying the role of political competition in the evolution of government size over long horizons," P.O.L.I.S. department's Working Papers 111, Department of Public Policy and Public Choice - POLIS. [Downloadable!]
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  9. Albert Sole-Olle & Pilar Sorribas-Navarro, 2008. "Does partisan alignment affect the electoral reward of intergovernmental transfers?," Working Papers in Economics 206, Universitat de Barcelona. Espai de Recerca en Economia. [Downloadable!]
  10. Albert Solé-Ollé, 2009. "Inter-Regional redistribution through infrastructure investment: tactical or programmatic?," Working Papers 2009/32, Institut d'Economia de Barcelona (IEB). [Downloadable!]
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