IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_7882.html
   My bibliography  Save this paper

Revealed Political Favoritism: Evidence from the Allocation of State Lottery Grants in Israel

Author

Listed:
  • Momi Dahan
  • Itamar Yakir

Abstract

This paper offers a complementary empirical approach that might be better suited to identify the extent of political favoritism in a multi-decision-maker institution than the standard identification strategy. The typical diff-in-diff identification strategy to estimate political favoritism, which rests on a comparison of two decision makers that allocate public funds to two groups, seems inadequate in a multi-player setting due to the multiple and conflicting political interests and social affiliations. To illustrate how our approach uncovers the degree of political favoritism, we use a policy change in allocating state lottery revenues to Israeli municipalities from discretion-based allocation to rules-based allocation. We find significant political favoritism under the old regime relative to the new one toward Jewish (versus Arab) and affluent (versus less affluent) municipalities. Our results suggest that adopting rules-based allocation might be effective in coping with political favoritism.

Suggested Citation

  • Momi Dahan & Itamar Yakir, 2019. "Revealed Political Favoritism: Evidence from the Allocation of State Lottery Grants in Israel," CESifo Working Paper Series 7882, CESifo.
    • Handle: RePEc:ces:ceswps:_7882
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp7882.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Khemani, Stuti, 2007. "Does delegation of fiscal policy to an independent agency make a difference? Evidence from intergovernmental transfers in India," Journal of Development Economics, Elsevier, vol. 82(2), pages 464-484, March.
    2. Bracco, Emanuele & Lockwood, Ben & Porcelli, Francesco & Redoano, Michela, 2015. "Intergovernmental grants as signals and the alignment effect: Theory and evidence," Journal of Public Economics, Elsevier, vol. 123(C), pages 78-91.
    3. Rohini Pande, 2003. "Can Mandated Political Representation Increase Policy Influence for Disadvantaged Minorities? Theory and Evidence from India," American Economic Review, American Economic Association, vol. 93(4), pages 1132-1151, September.
    4. Carozzi, Felipe & Repetto, Luca, 2016. "Sending the pork home: Birth town bias in transfers to Italian municipalities," Journal of Public Economics, Elsevier, vol. 134(C), pages 42-52.
    5. Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," American Economic Review, American Economic Association, vol. 80(1), pages 37-49, March.
    6. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
    7. Solé-Ollé, Albert & Sorribas-Navarro, Pilar, 2008. "The effects of partisan alignment on the allocation of intergovernmental transfers. Differences-in-differences estimates for Spain," Journal of Public Economics, Elsevier, vol. 92(12), pages 2302-2319, December.
    8. Lara E., Bernardo & Toro M., Sergio, 2019. "Tactical distribution in local funding: The value of an aligned mayor," European Journal of Political Economy, Elsevier, vol. 56(C), pages 74-89.
    9. Bracco, Emanuele & Redoano, Michela & Porcelli, Francesco, 2012. "Incumbent Effects and Partisan Alignment in Local Elections: a Regression Discontinuity Analysis Using Italian Data," CAGE Online Working Paper Series 87, Competitive Advantage in the Global Economy (CAGE).
    10. Fiva, Jon H. & Halse, Askill H., 2016. "Local favoritism in at-large proportional representation systems," Journal of Public Economics, Elsevier, vol. 143(C), pages 15-26.
    11. repec:hal:spmain:info:hdl:2441/sj22pruud8a7b8cdlvom4sbtp is not listed on IDEAS
    12. 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.
    13. Kevin Milligan & Michael Smart, 2005. "Regional Grants as Pork Barrel Politics," CESifo Working Paper Series 1453, CESifo.
    14. Quoc-Anh Do & Kieu-Trang Nguyen & Anh N. Tran, 2017. "One Mandarin Benefits the Whole Clan: Hometown Favoritism in an Authoritarian Regime," American Economic Journal: Applied Economics, American Economic Association, vol. 9(4), pages 1-29, October.
    15. Gonschorek, Gerrit J. & Schulze, Günther G. & Sjahrir, Bambang Suharnoko, 2018. "To the ones in need or the ones you need? The political economy of central discretionary grants − empirical evidence from Indonesia," European Journal of Political Economy, Elsevier, vol. 54(C), pages 240-260.
    16. Brollo, Fernanda & Nannicini, Tommaso, 2012. "Tying Your Enemy's Hands in Close Races: The Politics of Federal Transfers in Brazil," American Political Science Review, Cambridge University Press, vol. 106(4), pages 742-761, November.
    17. Ben-Bassat, Avi & Dahan, Momi & Klor, Esteban F., 2016. "Is centralization a solution to the soft budget constraint problem?," European Journal of Political Economy, Elsevier, vol. 45(C), pages 57-75.
    18. Momi Dahan, 2021. "Poverty and economic behavior: gambling on social security paydays," International Gambling Studies, Taylor & Francis Journals, vol. 21(1), pages 38-58, January.
    19. Berry, Christopher R. & Burden, Barry C. & Howell, William G., 2010. "The President and the Distribution of Federal Spending," American Political Science Review, Cambridge University Press, vol. 104(4), pages 783-799, November.
    20. Hainmueller, Jens & Mummolo, Jonathan & Xu, Yiqing, 2019. "How Much Should We Trust Estimates from Multiplicative Interaction Models? Simple Tools to Improve Empirical Practice," Political Analysis, Cambridge University Press, vol. 27(2), pages 163-192, April.
    21. David Albouy, 2013. "Partisan Representation in Congress and the Geographic Distribution of Federal Funds," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 127-141, March.
    22. Clotfelter, Charles T & Cook, Philip J, 1990. "On the Economics of State Lotteries," Journal of Economic Perspectives, American Economic Association, vol. 4(4), pages 105-119, Fall.
    23. Rozevitch, Shimon & Weiss, Avi, 1993. "Beneficiaries from Federal Transfers to Municipalities: The Case of Israel," Public Choice, Springer, vol. 76(4), pages 335-346, August.
    24. Marco Migueis, 2013. "The Effect of Political Alignment on Transfers to Portuguese Municipalities," Economics and Politics, Wiley Blackwell, vol. 25(1), pages 110-133, March.
    25. Debrun, Xavier & Jonung, Lars, 2019. "Under threat: Rules-based fiscal policy and how to preserve it," European Journal of Political Economy, Elsevier, vol. 57(C), pages 142-157.
    26. Brice Fabre & Marc Sangnier, 2017. "What Motivates French Pork: Political Career Concerns or Private Connections?," Institut des Politiques Publiques halshs-01480532, HAL.
    27. Gamalerio, Matteo, 2020. "Do national political parties matter? Evidence from Italian municipalities," European Journal of Political Economy, Elsevier, vol. 63(C).
    28. Gershon Alperovich, 1984. "The economics of choice in the allocation of intergovernmental grants to local authories," Public Choice, Springer, vol. 44(2), pages 285-296, January.
    29. Horrace, William C. & Oaxaca, Ronald L., 2006. "Results on the bias and inconsistency of ordinary least squares for the linear probability model," Economics Letters, Elsevier, vol. 90(3), pages 321-327, March.
    30. Roland Hodler & Paul A. Raschky, 2014. "Regional Favoritism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 995-1033.
    31. Momi Dahan & Michel Strawczynski, 2013. "Fiscal Rules and the Composition of Government Expenditures in OECD Countries," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 32(3), pages 484-504, June.
    32. Jennes, Geert & Persyn, Damiaan, 2015. "The effect of political representation on the geographic distribution of income: Evidence using Belgian data," European Journal of Political Economy, Elsevier, vol. 37(C), pages 178-194.
    33. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
    34. Banful, Afua Branoah, 2011. "Do formula-based intergovernmental transfer mechanisms eliminate politically motivated targeting? Evidence from Ghana," Journal of Development Economics, Elsevier, vol. 96(2), pages 380-390, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stephan Schneider & Sven Kunze, 2021. "Disastrous Discretion: Ambiguous Decision Situations Foster Political Favoritism," KOF Working papers 21-491, KOF Swiss Economic Institute, ETH Zurich.
    2. Gonschorek, Gerrit J., 2021. "Subnational favoritism in development grant allocations: Empirical evidence from decentralized Indonesia," World Development, Elsevier, vol. 139(C).
    3. Gonschorek, Gerrit J. & Schulze, Günther G. & Sjahrir, Bambang Suharnoko, 2018. "To the ones in need or the ones you need? The political economy of central discretionary grants − empirical evidence from Indonesia," European Journal of Political Economy, Elsevier, vol. 54(C), pages 240-260.
    4. Kauder, Björn & Potrafke, Niklas & Reischmann, Markus, 2016. "Do politicians reward core supporters? Evidence from a discretionary grant program," European Journal of Political Economy, Elsevier, vol. 45(C), pages 39-56.
    5. Kauder, Björn & Björn, Kauder & Niklas, Potrafke & Markus, Reischmann, 2016. "Do politicians gratify core supporters? Evidence from a discretionary grant program," VfS Annual Conference 2016 (Augsburg): Demographic Change 145509, Verein für Socialpolitik / German Economic Association.
    6. Luisa Schneider & Daniela Wech & Matthias Wrede, 2022. "Political alignment and project funding," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(6), pages 1561-1589, December.
    7. Baskaran, Thushyanthan & Lopes da Fonseca, Mariana, 2021. "Appointed public officials and local favoritism: Evidence from the German states," Journal of Urban Economics, Elsevier, vol. 124(C).
    8. Markus Reischmann, 2016. "Empirical Studies on Public Debt and Fiscal Transfers," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 63.
    9. Levoshko, Tamila, 2017. ""Pork-Barrel"-Politik und das regionale Wirtschaftswachstum. Empirische Evidenz für die Ukraine und Polen," Working Papers 0642, University of Heidelberg, Department of Economics.
    10. Brice Fabre & Marc Sangnier, 2022. "Where do politicians send pork? Evidence from central government transfers to French municipalities," DeFiPP Working Papers 2202, University of Namur, Development Finance and Public Policies.
    11. Fiva, Jon H. & Halse, Askill H., 2016. "Local favoritism in at-large proportional representation systems," Journal of Public Economics, Elsevier, vol. 143(C), pages 15-26.
    12. repec:hal:ipppap:halshs-04687331 is not listed on IDEAS
    13. Makarin, Alexey & Piqué, Ricardo & Aragón, Fernando, 2020. "National or sub-national parties: Does party geographic scope matter?," Journal of Development Economics, Elsevier, vol. 146(C).
    14. Puscas, Georgiana, 2021. "When does the winner take more? The role of political alignment in transfers to Romanian municipalities," Warwick-Monash Economics Student Papers 05, Warwick Monash Economics Student Papers.
    15. Jean-Francois Maystadt & Muhammad Kabir Salihu, 2015. "National or political cake?," Working Papers 100756558, Lancaster University Management School, Economics Department.
    16. Sergio Naruhiko Sakurai & Maria Isabel Accoroni Theodoro, 2020. "On the relationship between political alignment and government transfers: triple differences evidence from a developing country," Empirical Economics, Springer, vol. 58(3), pages 1107-1141, March.
    17. Kammas, Pantelis & Poulima, Maria & Sarantides, Vassilis, 2023. "Fueling the party machine: Evidence from Greece during Metapolitefsi," Explorations in Economic History, Elsevier, vol. 90(C).
    18. Reingewertz, Yaniv, 2014. "Fiscal Decentralization - a Survey of the Empirical Literature," MPRA Paper 59889, University Library of Munich, Germany.
    19. Marta Curto‐Grau & Albert Solé‐Ollé & Pilar Sorribas‐Navarro, 2017. "Does electoral competition curb party favoritism?," Working Papers 2017/04, Institut d'Economia de Barcelona (IEB).
    20. Mattos, Enlinson & Politi, Ricardo & Morata, Rodrigo, 2021. "Birthplace favoritism and the distribution of budget amendments in Brazil: Evidence from nondistrict elections," European Journal of Political Economy, Elsevier, vol. 68(C).
    21. Oskari Harjunen & Tuukka Saarimaa & Janne Tukiainen, 2021. "Love Thy (Elected) Neighbor? Residential Segregation, Political Representation and Local Public Goods," Discussion Papers 138, Aboa Centre for Economics.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_7882. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.