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Do Parties Matter for Fiscal Policy Choices? A Regression-Discontinuity Approach

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  • Pettersson-Lidbom , Per

    (Dept. of Economics, Stockholm University)

Abstract

This paper presents a method for measuring the causal effect of party control on fiscal policy outcomes. The source of identifying information comes from an institutional feature of the election system, namely that party control changes discontinuously at 50 percent of the vote share, i.e., a party that receives more than 50 percent of the votes will be in office. The approach is applied to a very large panel data set from Swedish local governments, which offers a number of attractive features. The results show that there is large and significant party effect: on average, left-wing parties spend and tax 2.5 percent more than right-wing governments. The party effect constitutes 1 percent of average municipality income, clearly a sizeable effect.

Suggested Citation

  • Pettersson-Lidbom , Per, 2003. "Do Parties Matter for Fiscal Policy Choices? A Regression-Discontinuity Approach," Research Papers in Economics 2003:15, Stockholm University, Department of Economics.
    • Handle: RePEc:hhs:sunrpe:2003_0015
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    Cited by:

    1. Irma Clots-Figueras, 2012. "Are Female Leaders Good for Education? Evidence from India," American Economic Journal: Applied Economics, American Economic Association, vol. 4(1), pages 212-244, January.
    2. Felix Rösel, 2017. "The Political Economy of Fiscal Supervision and Budget Deficits: Evidence from Germany," Fiscal Studies, Institute for Fiscal Studies, vol. 38, pages 641-666, December.
    3. Sonia Bhalotra & Irma Clots-Figueras, 2014. "Health and the Political Agency of Women," American Economic Journal: Economic Policy, American Economic Association, vol. 6(2), pages 164-197, May.
    4. Edmark, Karin & Ågren, Hanna, 2008. "Identifying strategic interactions in Swedish local income tax policies," Journal of Urban Economics, Elsevier, vol. 63(3), pages 849-857, May.
    5. Pettersson Lidbom, Per, 2003. "A Test of the Rational Electoral-Cycle Hypothesis," Research Papers in Economics 2003:16, Stockholm University, Department of Economics.
    6. Pettersson Lidbom, Per, 2003. "Does the Size of the Legislature Affect the Size of Government? Evidence from a Natural Experiment," Research Papers in Economics 2003:18, Stockholm University, Department of Economics.
    7. Pettersson-Lidbom, Per, 2012. "Does the size of the legislature affect the size of government? Evidence from two natural experiments," Journal of Public Economics, Elsevier, vol. 96(3), pages 269-278.
    8. Hanna Ågren & Matz Dahlberg & Eva Mörk, 2007. "Do politicians’ preferences correspond to those of the voters? An investigation of political representation," Public Choice, Springer, vol. 130(1), pages 137-162, January.
    9. 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.
    10. J. Vernon Henderson & Ari Kuncoro, 2006. "Sick of Local Government Corruption? Vote Islamic," NBER Working Papers 12110, National Bureau of Economic Research, Inc.
    11. Santarossa, Gino, 2008. "Note d'introduction sur l'évaluation d'impact d'un programme public par la méthode de régression par discontinuité [The Evaluation of Public Program Effect Using Regression Discontinuity Method : A," MPRA Paper 11268, University Library of Munich, Germany.
    12. Felix Rösel, 2014. "Co-Partisan Buddies or Partisan Bullies? Why State Supervision of Local Government Borrowing Fails," ifo Working Paper Series 189, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    13. Henderson, J. Vernon & Kuncoro, Ari, 2011. "Corruption and local democratization in Indonesia: The role of Islamic parties," Journal of Development Economics, Elsevier, vol. 94(2), pages 164-180, March.

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    More about this item

    Keywords

    political parties; party control; regression-discontinuity design;
    All these keywords.

    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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