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Rewarding allegiance: Political alignment and fiscal outcomes in local government

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  • Christa N. Brunnschweiler
  • Samuel K. Obeng

Abstract

We examine how local governments’ political alignment with central government affects subnational fiscal outcomes. In theory, alignment could be rewarded for example with more intergovernmental transfers, or swing voters in unaligned constituencies could be targeted instead. We analyze data from Ghana, which has a complex decentralized system that seeks to preclude political alignment effects. District Chief Executives (DCEs) are centrally appointed local administrators loyal to the ruling party, while district Members of Parliament (MPs) may belong to another party. A formula for central transfer distribution aims to limit the influence of party politics. Using a new dataset for 1994-2018 and a close election regression discontinuity design we find that despite this system, there is evidence of politically-motivated local fiscal outcomes. Aligned districts receive lower transfers and have lower district expenditure and internally generated funds, indicating swing-voter targeting. Results suggest that district fragmentations have weakened these effects. We also show strong electoral cycle effects, with mid-term peaks in fiscal outcomes.

Suggested Citation

  • Christa N. Brunnschweiler & Samuel K. Obeng, 2023. "Rewarding allegiance: Political alignment and fiscal outcomes in local government," Discussion Papers 2023-14, Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP).
    • Handle: RePEc:not:notnic:2023-14
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    More about this item

    Keywords

    political alignment; Ghana; regression discontinuity; electoral cycles; fiscal federalism;
    All these keywords.

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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