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Government Spending and Legislative Organization: Quasi-experimental evidence from Germany

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Listed:
  • Peter Egger

    (ETH Zurich)

  • Marko Koethenbuerger

    (Department of Economics, University of Copenhagen)

Abstract

This paper presents empirical evidence of a positive effect of council size on government spending using a data set of 2,056 municipalities in the German state of Bavaria over a period of 21 years. We apply a regression discontinuity design to avoid an endogeneity bias. In particular, we exploit discontinuities in the legal rule that relates population size of a municipality to council size to identify a causal relationship between council size and public spending, and find a robust positive impact of council size on spending. Moreover, we show that municipalities primarily adjust current expenditure in response to a rise in council size.

Suggested Citation

  • Peter Egger & Marko Koethenbuerger, 2010. "Government Spending and Legislative Organization: Quasi-experimental evidence from Germany," EPRU Working Paper Series 2010-09, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:epruwp:10-09
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    More about this item

    Keywords

    Legislative organization; Regression-discontinuity design; Government spending; Mayor-council system;
    All these keywords.

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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