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Do Politicians Free-ride? - an empirical test of the common pool model

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  • Tyrefors, Björn

    (Dept. of Economic Statistics, Stockholm School of Economics)

Abstract

In the twentieth century there was a significant trend towards larger local governments through amalgamations in the western world. Amalgamations provide potential economic benefits but might also give rise to costs driven by opportunistic political behavior. This study uses a compulsory amalgamation reform of municipalities in Sweden to test for such behavior. The reform gives a local government incentives to accumulate debt before the amalgamation takes place, since the cost will be shared by all tax payers in the new municipality. The strength of this incentive to free ride will be determined by the locality's population size, relative to the future size of the new locality. We find an economically large and statistically significant free riding effect and the result is robust.

Suggested Citation

  • Tyrefors, Björn, 2006. "Do Politicians Free-ride? - an empirical test of the common pool model," SSE/EFI Working Paper Series in Economics and Finance 626, Stockholm School of Economics, revised 28 Feb 2007.
    • Handle: RePEc:hhs:hastef:0626
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    References listed on IDEAS

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    Cited by:

    1. Henrik Jordahl & Che-Yuan Liang, 2010. "Merged municipalities, higher debt: on free-riding and the common pool problem in politics," Public Choice, Springer, vol. 143(1), pages 157-172, April.
    2. Tyrefors Hinnerich, Björn, 2009. "Do merging local governments free ride on their counterparts when facing boundary reform?," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 721-728, June.

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    More about this item

    Keywords

    common pool; amalgamations; free riding; local government; difference-in-difference;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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