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Do Politicians Reward Core Supporters? Evidence from a Discretionary Grant Program

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  • Björn Kauder
  • Niklas Potrafke
  • Markus Reischmann

Abstract

We investigate whether politicians award intergovernmental grants to core supporters. Our new dataset contains information on discretionary project grants from a German state government to municipalities over the period 2008-2011. The results show that discretionary grants were awarded to municipalities with many core supporters of the incumbent state government. Discretionary grants per capita increased by about 1.4 percent when the vote share of the incumbent party in the state election increased by one percentage point. The fiscal capacity of a municipality does, by contrast, not predict the level of discretionary grants. We propose to trim discretionary project grants to the benefit of formula-based grants.

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  • Björn Kauder & Niklas Potrafke & Markus Reischmann, 2016. "Do Politicians Reward Core Supporters? Evidence from a Discretionary Grant Program," CESifo Working Paper Series 6097, CESifo.
    • Handle: RePEc:ces:ceswps:_6097
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    More about this item

    Keywords

    intergovernmental grants; discretionary grants; fiscal equalization; core supporters; electoral motives;
    All these keywords.

    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
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

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