Choosing between service fees and budget funding to pay for local services: empirical evidence from Spain
In this paper we investigate how local governments finance public services, and their choice between budget funding and flat service fees. On the basis of a simple model of electoral competition we predict that the tax policy will be extreme (either progressive or conservative) only if both the voting majority’s economic interests and the valence point to the same ideological side. If ideological and economic interests diverge, then the equilibrium policy will be a moderate one. From our empirical analysis we find that progressive mayors in progressive constituencies use budget funding to a greater degree, whereas conservative mayors in conservative constituencies prefer flat service fees. When the political affiliation of the mayor and the ideological bias of the constituency diverge, more moderate policies are chosen. We find also that service-specific deficits are lower in cities with private production of solid waste service. Thus policy makers may have used privatization as a means to reduce the political cost of increasing service-specific taxes.
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.:
- Santiago Lago-Peñas, 2005.
"Evolving federations and regional public deficits: testing the bailout hypothesis in the Spanish case,"
Environment and Planning C: Government and Policy,
Pion Ltd, London, vol. 23(3), pages 437-453, June.
- Santiago Lago-Peñas, . "Evolving Federations and Regional Public Deficits: Testing the Bailout Hypothesis in the Spanish Case," Studies on the Spanish Economy 193, FEDEA.
- Ansolabehere, Stephen & Snyder, James M, Jr, 2000. "Valence Politics and Equilibrium in Spatial Election Models," Public Choice, Springer, vol. 103(3-4), pages 327-36, June.
- Edin, Per-Anders & Ohlsson, Henry, 1991.
"Political determinants of budget deficits: Coalition effects versus minority effects,"
European Economic Review,
Elsevier, vol. 35(8), pages 1597-1603, December.
- Edin, P-A. & Ohlsson, H., 1990. "Political Determinants Of Budget Deficits: Coalition Effects Versus Minority Effects," Papers 1990k, Uppsala - Working Paper Series.
- Tabellini, Guido & Alesina, Alberto, 1990.
"Voting on the Budget Deficit,"
4553030, Harvard University Department of Economics.
- Alesina, Alberto F & Tabellini, Guido, 1988. "Voting on the Budget Deficit," CEPR Discussion Papers 269, C.E.P.R. Discussion Papers.
- Guido Tabellini & Alberto Alesina, 1988. "Voting on the Budget Deficit," UCLA Economics Working Papers 539, UCLA Department of Economics.
- Alberto Alesina & Guido Tabellini, 1988. "Voting on the Budget Deficit," NBER Working Papers 2759, National Bureau of Economic Research, Inc.
- Friedman, Daniel & Wittman, Donald, 1995. "Why voters vote for incumbents but against incumbency: A rational choice explanation," Journal of Public Economics, Elsevier, vol. 57(1), pages 67-83, May.
- Kenneth Rogoff & Anne Sibert, 1986.
"Elections and Macroeconomic Policy Cycles,"
NBER Working Papers
1838, National Bureau of Economic Research, Inc.
- Torsten Persson & Lars E. O. Svensson, 1989. "Why a Stubborn Conservative would Run a Deficit: Policy with Time-Inconsistent Preferences," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 325-345.
- Andrés Rodríguez-Pose & Richard Sandall, 2008. "From identity to the economy: analysing the evolution of the decentralisation discourse," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 26(1), pages 54-72, February.
- Bos, Dieter, 2000. "Earmarked taxation: welfare versus political support," Journal of Public Economics, Elsevier, vol. 75(3), pages 439-462, March.
- Paul R. Blackley & Larry DeBoer, 1987. "Tax Base Choice by Local Governments," Land Economics, University of Wisconsin Press, vol. 63(3), pages 227-236.
- J. Biegeleisen & David Sjoquist, 1988. "Rational voting applied to choice of taxes," Public Choice, Springer, vol. 57(1), pages 39-47, April.
- Cukierman, Alex, 1991. "Asymmetric Information and the Electoral Momentum of Public Opinion Polls," Public Choice, Springer, vol. 70(2), pages 181-213, May.
- Hettich, Walter & Winer, Stanley, 1984. "A positive model of tax structure," Journal of Public Economics, Elsevier, vol. 24(1), pages 67-87, June.
- Richard M Bird & Enid Slack, 2007. "An approach to metropolitan governance and finance," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 25(5), pages 729-755, October.
- Hettich, Walter & Winer, Stanley L, 1988. "Economic and Political Foundations of Tax Structure," American Economic Review, American Economic Association, vol. 78(4), pages 701-12, September.
- Avinash Dixit & John Londregan, 1998. "Ideology, Tactics, and Efficiency in Redistributive Politics," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 497-529.
- de Haan, Jakob & Sturm, Jan-Egbert, 1997. "Political and economic determinants of OECD budget deficits and government expenditures: A reinvestigation," European Journal of Political Economy, Elsevier, vol. 13(4), pages 739-750, December.
- William Stine, 1998. "Explaining the decision to repeal an optional local tax," Applied Economics, Taylor & Francis Journals, vol. 30(3), pages 353-363.
- Gill, H. Leroy & Haurin, Donald R., 2001. "The choice of tax base by local authorities: voter preferences, special interest groups, and tax base diversification," Regional Science and Urban Economics, Elsevier, vol. 31(6), pages 733-749, November.
- Galli, Emma & Padovano, Fabio, 2002. "A Comparative Test of Alternative Theories of the Determinants of Italian Public Deficits (1950-1998)," Public Choice, Springer, vol. 113(1-2), pages 37-58, October.
- Elbert Dijkgraaf & Raymond Gradus, 2004.
"Cost savings of unit-based pricing of household waste: The case of the Netherlands,"
- Dijkgraaf, E. & Gradus, R. H. J. M., 2004. "Cost savings in unit-based pricing of household waste: The case of The Netherlands," Resource and Energy Economics, Elsevier, vol. 26(4), pages 353-371, December.
- Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
- Roberto Ricciuti, 2004. "Political Fragmentation and Fiscal Outcomes," Public Choice, Springer, vol. 118(3_4), pages 365-388, 03.
- Carbonell-Nicolau, Oriol & Ok, Efe A., 2007. "Voting over income taxation," Journal of Economic Theory, Elsevier, vol. 134(1), pages 249-286, May.
- Ignacio Ortuño Orti´n, 2002. "Ideological versus Downsian political competition," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 19(3), pages 551-567.
- 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.
- Bernhardt, M. Daniel & Ingerman, Daniel E., 1985. "Candidate reputations and the `incumbency effect'," Journal of Public Economics, Elsevier, vol. 27(1), pages 47-67, June.
- Anesi, Vincent, 2006. "Earmarked taxation and political competition," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 679-701, May.
When requesting a correction, please mention this item's handle: RePEc:pio:envirc:v:28:y:2010:i:1:p:54-71. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Neil Hammond)
If references are entirely missing, you can add them using this form.