Lobbying, political competition, and local land supply: Recent evidence from Spain

We analyze whether local land supply is influenced by the degree of political competition, and interpret the findings as indications of the influence wielded by land developer lobbies. We use a new database including both political and land supply data for more than 2,000 Spanish municipalities for the period 2003–2007. In Spain, land use policies are largely a local responsibility, with municipalities needing periodically to pass comprehensive land use plans. The main policy variable in these plans, and the one analyzed here, is the amount of land classified for potential development. We measure local political competition as the margin of victory of the incumbent government. This variable is, however, potentially endogenous, since not only do votes affect policy, but also policy is expected to affect votes. To deal with this problem, we instrument this variable using the votes at the first national legislative elections following the re-establishment of democracy and votes actually obtained regionally at the same type of election. The results indicate that stiffer political competition does indeed reduce the amount of new land designated for development. This effect is found to be most marked in suburbs, in towns with a high percentage of commuters and homeowners, and in municipalities governed by the left.