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Revealed political favoritism: evidence from the allocation of state lottery grants in Israel

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  • Momi Dahan

    (Hebrew University)

  • Itamar Yakir

    (Hebrew University)

Abstract

This paper explores whether rules-based allocation is an effective tool for restraining political favoritism. We exploit a policy shift in distributing state lottery revenues to Israeli municipalities from discretion-based to rules-based allocation to estimate the extent of political favoritism. By comparing the likelihood of receiving grants by two types of localities before and after a policy reform, our approach offers a complementary empirical strategy for studying political favoritism that can be used even in the absence of exogenous variation in political connections; it likewise may reveal the overall impact of multiple political interests and social affiliations on favoritism. We find that political favoritism toward Jewish (versus Arab) and affluent (versus less affluent) municipalities diminished significantly after the reform but has not yet disappeared along the ethnic dimension. Our results suggest that adopting rules-based allocation might be effective in coping with political favoritism.

Suggested Citation

  • Momi Dahan & Itamar Yakir, 2022. "Revealed political favoritism: evidence from the allocation of state lottery grants in Israel," Public Choice, Springer, vol. 190(3), pages 387-406, March.
    • Handle: RePEc:kap:pubcho:v:190:y:2022:i:3:d:10.1007_s11127-021-00941-7
    DOI: 10.1007/s11127-021-00941-7
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    Cited by:

    1. Zareh Asatryan & Annika Havlik, 2020. "The political economy of multilateral lending to European regions," The Review of International Organizations, Springer, vol. 15(3), pages 707-740, July.

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    More about this item

    Keywords

    Political favoritism; Grant allocation; Local government; Rules vs. Discretion;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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