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Do Parties Matter for Fiscal Policy Choices? A Regression-Discontinuity Approach

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Author Info
Pettersson-Lidbom , Per () (Dept. of Economics, Stockholm University)
Abstract

This paper presents a method for measuring the causal effect of party control on fiscal policy outcomes. The source of identifying information comes from an institutional feature of the election system, namely that party control changes discontinuously at 50 percent of the vote share, i.e., a party that receives more than 50 percent of the votes will be in office. The approach is applied to a very large panel data set from Swedish local governments, which offers a number of attractive features. The results show that there is large and significant party effect: on average, left-wing parties spend and tax 2.5 percent more than right-wing governments. The party effect constitutes 1 percent of average

municipality income, clearly a sizeable effect.

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Publisher Info
Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2003:15.

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Length: 33 pages
Date of creation: 17 Dec 2003
Date of revision:
Handle: RePEc:hhs:sunrpe:2003_0015

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Related research
Keywords: political parties; party control; regression-discontinuity design;

Find related papers by JEL classification:
P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Martin J. Osborne, 1995. "Spatial Models of Political Competition under Plurality Rule: A Survey of Some Explanations of the Number of Candidates and the Positions They Take," Canadian Journal of Economics, Canadian Economics Association, vol. 28(2), pages 261-301, May. [Downloadable!] (restricted)
  2. Faust, Jon & Irons, John S., 1999. "Money, politics and the post-war business cycle," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 61-89, February. [Downloadable!] (restricted)
  3. Levitt, Steven D, 1996. "How Do Senators Vote? Disentangling the Role of Voter Preferences, Party Affiliation, and Senate Ideology," American Economic Review, American Economic Association, vol. 86(3), pages 425-41, June. [Downloadable!] (restricted)
  4. Joshua D. Angrist & Victor Lavy, 1999. "Using Maimonides' Rule To Estimate The Effect Of Class Size On Scholastic Achievement," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 533-575, May. [Downloadable!] (restricted)
  5. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October. [Downloadable!] (restricted)
  6. 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.
    Other versions:
  7. Besley, Timothy & Case, Anne, 1995. "Does Electoral Accountability Affect Economic Policy Choices? Evidence from Gubernatorial Term Limits," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 769-98, August. [Downloadable!] (restricted)
    Other versions:
  8. Per Pettersson-Lidbom, 2001. "An Empirical Investigation of the Strategic Use of Debt," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 570-583, June. [Downloadable!] (restricted)
  9. Heckman, James J. & Robb, Richard Jr., 1985. "Alternative methods for evaluating the impact of interventions : An overview," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 239-267. [Downloadable!] (restricted)
  10. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Pettersson Lidbom, Per, 2003. "Does the Size of the Legislature Affect the Size of Government? Evidence from a Natural Experiment," Research Papers in Economics 2003:18, Stockholm University, Department of Economics. [Downloadable!]
  12. Alesina, Alberto, 1988. "Credibility and Policy Convergence in a Two-Party System with Rational Voters," American Economic Review, American Economic Association, vol. 78(4), pages 796-805, September.
  13. Jon Faust & John Irons, 1996. "Money, politics and the post-war business cycle," International Finance Discussion Papers 572, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  14. Caroline M. Hoxby, 2000. "The Effects Of Class Size On Student Achievement: New Evidence From Population Variation," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1239-1285, November. [Downloadable!] (restricted)
  15. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-09, January.
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  1. Dahlberg, Matz & Mörk, Eva & Ågren, Hanna, 2004. "Do Politicians’ Preferences Correspond to those of the Voters? An Investigation of Political Representation," Working Paper Series 2004:2, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  2. Pettersson Lidbom, Per, 2003. "A Test of the Rational Electoral-Cycle Hypothesis," Research Papers in Economics 2003:16, Stockholm University, Department of Economics. [Downloadable!]
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