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Do Coalitions Really Cause Larger Government Expenditures? – Mixed Evidence from a Regression Discontinuity Design

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  • Garmann, Sebastian

Abstract

This paper measures the causal effect of coalition vs. single-party governments on fiscal policies using a data set of 396 municipalities in the German state of North Rhine-Westphalia in the time period 1985-2004. Using a regression discontinuity design to take the endogeneity of the type of government into account, we exploit a discontinuity that comes through the change from a coalition to a single-party government at 50% of the seat share of the strongest party. Our results point to a significant effect of the type of government on personnel expenditures, while we do not find significant results for material spending and investment expenditures. These results differ substantially from simple OLS estimates.

Suggested Citation

  • Garmann, Sebastian, 2012. "Do Coalitions Really Cause Larger Government Expenditures? – Mixed Evidence from a Regression Discontinuity Design," Ruhr Economic Papers 339, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:339
    DOI: 10.4419/86788391
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    Citations

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    Cited by:

    1. Meriläinen, Jaakko, 2013. "Do Single-Party and Coalition Governments Differ in their Economic Outcomes? Evidence from Finnish Municipalities," Working Papers 51, VATT Institute for Economic Research.
    2. Bernard, René, 2017. "Political fragmentation and fiscal policy: Evidence from German municipalities," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 17-03, University of Cologne, FiFo Institute for Public Economics.

    More about this item

    Keywords

    Legislative organization; regression discontinuity design; local fiscal policy; coalition governments; government spending; panel data;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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