Ideology or Voters? A Quasi-Experimental Test of Why Left-Wing Governments Spend More

In the literature, there is a widespread consensus that left-wing governments raise taxes and public spending more than their right-wing counterparts. We demonstrate that this result must be interpreted with caution. What might seem a partisan effect, due to the direct impact of parties’ ideology on public spending, might actually be a selection bias, because changes in the distribution of voters’ preferences determine changes of the ideology of the government in office. We overcome this problem of observational equivalence by applying two identification strategies, regression discontinuity design and propensity score matching. Using data from the French local public sector, we show that left-wing governments facing the same economic situation as rightwing ones do not spend more, particularly in the case of social expenditures. This result rules out the partisan-politicians hypothesis and lends support to demand driven policy selection processes.