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Political Fragmentation and Fiscal Status: Evidence from Municipalities in Israel

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  • Yaniv Reingewertz

Abstract

This article analyses the link between fiscal balance and political fragmentation. While a large body of literature states that political fragmentation leads to fiscal deficits, others suggest that political fragmentation is associated with political competition, which tends to improve fiscal balance. These hypotheses are tested using budgetary and political data of municipalities in Israel for the years 1998–2006. The results suggest that both hypotheses may be correct, depending on voting behaviour. In Arab municipalities, where residents vote according to clan affiliation, low levels of political fragmentation are associated with large debts. On the contrary, in Jewish municipalities, low levels of political fragmentation are associated with small debts, since in these cases, coalition formation requires less spending and is easier to sustain.

Suggested Citation

  • Yaniv Reingewertz, 2015. "Political Fragmentation and Fiscal Status: Evidence from Municipalities in Israel," Local Government Studies, Taylor & Francis Journals, vol. 41(5), pages 774-793, September.
  • Handle: RePEc:taf:flgsxx:v:41:y:2015:i:5:p:774-793
    DOI: 10.1080/03003930.2015.1028625
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    Cited by:

    1. Baskaran, Thushyanthan & Brender, Adi & Blesse, Sebastian & Reingewertz, Yaniv, 2016. "Revenue decentralization, central oversight and the political budget cycle: Evidence from Israel," European Journal of Political Economy, Elsevier, vol. 42(C), pages 1-16.
    2. Yaniv Reingewertz & Itai Beeri, 2018. "How effective is central enforcement? Evidence from convened committees in failing local authorities," Environment and Planning C, , vol. 36(2), pages 357-380, March.

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