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Disentangling the fiscal effects of local constitutions

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  • Kantorowicz, Jarosław
  • Köppl–Turyna, Monika

Abstract

We apply a regression discontinuity design to verify how constitutional rules, such as electoral systems, shape budget revenues at the subnational governmental level. We take advantage of a natural experiment involving an institutional reform at the local level in Poland. The reform introduced two electoral rules, which changed according to an exogenous population threshold: smaller municipalities used majoritarian elections and larger municipalities used proportional elections. While intergovernmental grants increased in both small and large municipalities, they increased less in municipalities with majoritarian elections compared to jurisdictions with proportional representation. This has further implications regarding the level of property taxes and vertical fiscal imbalance. The jurisdictions with proportional electoral systems had lower revenues from property taxes and higher vertical fiscal imbalance than jurisdictions with majoritarian systems. We show that this effect works through the alignment channel, which is driven by the political alignment of mayors with parties in the central government. This is more prevalent in proportional election scenarios. We also demonstrate that these effects are more pronounced in the period after 2002, when direct elections of mayors were introduced.

Suggested Citation

  • Kantorowicz, Jarosław & Köppl–Turyna, Monika, 2019. "Disentangling the fiscal effects of local constitutions," Journal of Economic Behavior & Organization, Elsevier, vol. 163(C), pages 63-87.
  • Handle: RePEc:eee:jeborg:v:163:y:2019:i:c:p:63-87
    DOI: 10.1016/j.jebo.2019.05.013
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    Cited by:

    1. Kantorowicz, Jarosław, 2017. "Electoral systems and fiscal policy outcomes: Evidence from Poland," European Journal of Political Economy, Elsevier, vol. 47(C), pages 36-60.
    2. Kantorowicz, Jarosław & Köppl-Turyna, Monika, 2020. "Electoral systems and female representation in politics: Evidence from a regression discontinuity," Working Papers 20, Agenda Austria.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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