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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

    ()
    (Institut d'Economia de Barcelona (IEB); Universitat de Barcelona (UB))

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.

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Bibliographic Info

Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2005/2.

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Length: 44 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:ieb:wpaper:334835art66

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Keywords: Deficit; Local government; Political competition; Spending;

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References

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  1. Rogers, Diane Lim & Rogers, John H, 2000. " Political Competition and State Government Size: Do Tighter Elections Produce Looser Budgets?," Public Choice, Springer, Springer, vol. 105(1-2), pages 1-21, October.
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  11. Kenneth Rogoff, 1987. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
  12. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, Springer, vol. 52(3), pages 273-297, January.
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Citations

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Cited by:
  1. J. Stephen Ferris, 2007. "Is the Bank of Canada any more or less independent than the Fed? – revised version: Electoral Politics and Monetary Policy: Does the Bank of Canada Contribute to a Political Business Cycle?," Carleton Economic Papers, Carleton University, Department of Economics 07-02, Carleton University, Department of Economics, revised 08 Jan 2008.
  2. Kiss, Áron, 2009. "Coalition politics and accountability," Discussion Papers, Research Unit: Market Processes and Governance, Social Science Research Center Berlin (WZB) SP II 2009-01, Social Science Research Center Berlin (WZB).
  3. Saibal Ghosh, 2010. "Does Political Competition Matter for Economic Performance? Evidence from Sub-national Data," Political Studies, Political Studies Association, Political Studies Association, vol. 58, pages 1030-1048, December.
  4. Albert Solé-Ollé & Pilar Sorribas-Navarro, 2008. "Does partisan alignment affect the electoral reward of intergovernmental transfers?," Working Papers, Institut d'Economia de Barcelona (IEB) 2008/2, Institut d'Economia de Barcelona (IEB).
  5. 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, Springer, vol. 14(1), pages 71-92, February.
  6. Mogues, Tewodaj & Benin, Samuel, 2012. "Do External Grants to District Governments Discourage Own Revenue Generation? A Look at Local Public Finance Dynamics in Ghana," World Development, Elsevier, Elsevier, vol. 40(5), pages 1054-1067.
  7. B. Buylen & J. Christiaens, 2013. "Politics by numbers? An exploration of councillors’ apparent use of financial information during the budget discussion in Flemish municipal councils," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 13/841, Ghent University, Faculty of Economics and Business Administration.
  8. J. Stephen Ferris, 2010. "Fiscal Policy from a Public Choice Perspective," Carleton Economic Papers, Carleton University, Department of Economics 10-10, Carleton University, Department of Economics.
  9. J. Ferris & Soo-Bin Park & Stanley Winer, 2008. "Studying the role of political competition in the evolution of government size over long horizons," Public Choice, Springer, Springer, vol. 137(1), pages 369-401, October.
  10. 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.
  11. Solé-Ollé, Albert & Sorribas-Navarro, Pilar, 2008. "The effects of partisan alignment on the allocation of intergovernmental transfers. Differences-in-differences estimates for Spain," Journal of Public Economics, Elsevier, Elsevier, vol. 92(12), pages 2302-2319, December.
  12. Albert Solé-Ollé, 2009. "Inter-regional redistribution through infrastructure investment: tactical or programmatic?," Working Papers, Xarxa de Referència en Economia Aplicada (XREAP) XREAP2009-13, Xarxa de Referència en Economia Aplicada (XREAP), revised Nov 2009.
  13. Albert Solé-Ollé & Elisabet Viladecans-Marsal, 2007. "Economic and political determinants of urban expansion: Exploring the local connection," Working Papers, Institut d'Economia de Barcelona (IEB) 2007/5, Institut d'Economia de Barcelona (IEB).
  14. Raffaella SANTOLINI, 2007. "An Empitical Analysis of Political and Informative Trends on Municipalities of an Italian Region," Working Papers, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali 294, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

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