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Do Single-Party and Coalition Governments Differ in their Economic Outcomes? Evidence from Finnish Municipalities

  • Meriläinen
  • Jaakko

Even though Finland has proportional elections, single-party control in Finnish local councils is not uncommon contrary to what one might expect. The largest party holds more than half of the seats in every third Finnish local council and is thus likely to govern alone. This study investigates whether single-party and coalition governed municipalities differ in their economic outcomes. Common pool models predict that when there is a governing coalition, all the parties aim to target some spending at their core constituents, while costs are shared equally across all parties. This would mean that coalition governments result in higher spending. Using data from 445 Finnish municipalities for the years 1980?2010, I provide causal evidence that is consistent with the predictions of common pool models. Estimates suggest that single-party control decreases total expenditures and revenues by around 200?300 euros per capita. I also analyze the effect in several areas of spending and revenues, but do not find any clear results. I exploit close elections as a source of exogenous variation using a regression discontinuity design (RDD) approach tailored for proportional elections.

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Paper provided by Government Institute for Economic Research Finland (VATT) in its series Working Papers with number 51.

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Date of creation: 07 Oct 2013
Date of revision:
Handle: RePEc:fer:wpaper:51
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  2. McCrary, Justin, 2008. "Manipulation of the running variable in the regression discontinuity design: A density test," Journal of Econometrics, Elsevier, vol. 142(2), pages 698-714, February.
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  8. Leigh, Andrew, 2008. "Estimating the impact of gubernatorial partisanship on policy settings and economic outcomes: A regression discontinuity approach," European Journal of Political Economy, Elsevier, vol. 24(1), pages 256-268, March.
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  11. Khemani, Stuti & Wane, Waly, 2008. "Populist fiscal policy," Policy Research Working Paper Series 4762, The World Bank.
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