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Rewarding Allegiance: Political Alignment and Fiscal Outcomes in Local Government

Author

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  • Christa N. Brunnschweiler

    (University of East Anglia)

  • Samuel Kwabena Obeng

    (University of East Anglia)

Abstract

We examine how local governments’ political alignment with central government affects subnational fiscal outcomes. In theory, alignment could be rewarded 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: District Chief Executives (DCEs) are centrally-appointed local administrators loyal to the ruling party, while district MPs may belong to another party. A formula for transfer distribution aims to limit the influence of party politics. Using a new dataset for 1994-2014 and a regression discontinuity design, we find that despite this system, districts with aligned MP and DCE receive more transfers, have higher district expenditure, and more internally generated funds. Results are strongest for a subsample of constant districts over the period, suggesting that municipal fragmentation has weakened political alignment effects. We also show strong electoral cycle effects, and find a crowd-in effect for Ghanaian districts.

Suggested Citation

  • Christa N. Brunnschweiler & Samuel Kwabena Obeng, 2020. "Rewarding Allegiance: Political Alignment and Fiscal Outcomes in Local Government," University of East Anglia School of Economics Working Paper Series 2020-05, School of Economics, University of East Anglia, Norwich, UK..
    • Handle: RePEc:uea:ueaeco:2020-05
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    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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