Do Politicians Free-ride? - an empirical test of the common pool model
AbstractIn the twentieth century there was a significant trend towards larger local governments through amalgamations in the western world. Amalgamations provide potential economic benefits but might also give rise to costs driven by opportunistic political behavior. This study uses a compulsory amalgamation reform of municipalities in Sweden to test for such behavior. The reform gives a local government incentives to accumulate debt before the amalgamation takes place, since the cost will be shared by all tax payers in the new municipality. The strength of this incentive to free ride will be determined by the locality's population size, relative to the future size of the new locality. We find an economically large and statistically significant free riding effect and the result is robust.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 626.
Length: 24 pages
Date of creation: 26 Apr 2006
Date of revision: 19 Sep 2006
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More information through EDIRC
common pool; amalgamations; free riding; local government; difference-in-difference;
Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-13 (All new papers)
- NEP-MAC-2006-05-13 (Macroeconomics)
- NEP-PBE-2006-05-13 (Public Economics)
- NEP-POL-2006-05-13 (Positive Political Economics)
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