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Political alignment and intergovernmental transfers in parliamentary systems: evidence from Germany

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  • Thushyanthan Baskaran

    () (University of Siegen)

  • Zohal Hessami

    (University of Konstanz)

Abstract

Abstract Combining local council election data with fiscal data on grant allocations in a German state, we study partisan favoritism in the allocation of intergovernmental transfers within a quasi-experimental framework. We hypothesize that state governments pursue two distinct goals when allocating grants to local governments: (1) helping aligned local parties win the next election and (2) buying off unaligned municipalities that may obstruct the state government’s policy agenda. We argue furthermore that the relative importance of these two goals depends on local political conditions. In line with this argument, we show empirically that the effect of political alignment on grant receipts varies depending on the degree of local support for the state government. While previous contributions find that aligned local governments always tend to receive larger transfers, our results imply that the political economy of intergovernmental transfers is more intricate.

Suggested Citation

  • Thushyanthan Baskaran & Zohal Hessami, 2017. "Political alignment and intergovernmental transfers in parliamentary systems: evidence from Germany," Public Choice, Springer, vol. 171(1), pages 75-98, April.
  • Handle: RePEc:kap:pubcho:v:171:y:2017:i:1:d:10.1007_s11127-016-0398-4
    DOI: 10.1007/s11127-016-0398-4
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    Cited by:

    1. Freier, Ronny & Odendahl, Christian, 2015. "Do parties matter? Estimating the effect of political power in multi-party systems," European Economic Review, Elsevier, vol. 80(C), pages 310-328.
    2. Wittrock, Christian & Riedel, Nadine & Simmler, Martin, 2016. "Do Political Parties Matter? - Evidence from German Communities," Annual Conference 2016 (Augsburg): Demographic Change 145906, Verein für Socialpolitik / German Economic Association.
    3. repec:kap:pubcho:v:171:y:2017:i:1:d:10.1007_s11127-017-0435-y is not listed on IDEAS

    More about this item

    Keywords

    Intergovernmental transfers; Political alignment; State and local governments; Fiscal federalism; Quasi-parliamentarism; State and local elections;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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