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Against the tide: how changes in political alignment affect grant allocation to municipalities in Hungary

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  • Tamás Vasvári

    (University of Pécs)

  • Dóra Longauer

    (University of Pécs)

Abstract

The 2019 local election in Hungary accelerated the trend of centralization, marked by a simultaneous reduction in available local funds and an increase in discretionary transfers to local governments. This paper, utilizing a dataset encompassing all over 3000 municipalities from 2015 to 2020, employs fixed-effect estimations and a regression discontinuity design to explore how election outcomes influenced central decisions on intergovernmental transfers. Generally, larger municipalities are more susceptible to political influence, particularly in the allocation of discretionary grants, whereas smaller settlements appear less affected by political shifts. Changes in political alignment triggered a rewarding policy for municipalities that remained or converted to aligned status, resulting in an additional 86.4% and 65.2% of discretionary funds, respectively, relative to those converting to or remaining unaligned. Our research establishes that political influence in intergovernmental transfers has intensified since 2019, offering valuable insights for the upcoming 2024 election.

Suggested Citation

  • Tamás Vasvári & Dóra Longauer, 2024. "Against the tide: how changes in political alignment affect grant allocation to municipalities in Hungary," Public Choice, Springer, vol. 198(3), pages 467-492, March.
    • Handle: RePEc:kap:pubcho:v:198:y:2024:i:3:d:10.1007_s11127-023-01138-w
    DOI: 10.1007/s11127-023-01138-w
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    Cited by:

    1. Vasvári, Tamás & Pocsai, Erzsébet, 2024. "Kontrollok az önkormányzati hitelezésben - az elmúlt évtized tanulságai [Controls in municipal borrowing in Hungary - A decade of experience]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 881-914.

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    More about this item

    Keywords

    Local government; Grant allocation; Election; Political favoritism; Hungary;
    All these keywords.

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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