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The effects of party competition on budget outcomes: Empirical evidence from local governments in Spain

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  • Albert Solé Ollé

    (Institut d'Economia de Barcelona (IEB); Universitat de Barcelona (UB))

Abstract

This paper investigates the link between local budget outcomes and the intensity of party competition, measured as the margin of victory obtained by the incumbent in the previous local election (i.e. the difference between the vote share and 50%). Two competing hypotheses are tested in the paper. On the one hand, the Leviathan government hypothesis suggests that the lower the intensity of party competition is, the greater is the increase in the size of the local public sector, irrespective of the ideology of the party in power. On the other hand, the Partisan government hypothesis suggests that the incumbent will find it easier to advance its platform when intensity of competition is low (i.e., parties on the left/right will increase/decrease the size of the local public sector when the intensity of the challenge from the opposition is low). These hypotheses are tested with information on spending, own revenues and deficit for more than 500 Spanish local governments over 8 years (1992-1999), and information on the results of two local electoral contests (1991 and 1995). The evidence favors the Partisan hypothesis over the Leviathan one.

Suggested Citation

  • Albert Solé Ollé, 2005. "The effects of party competition on budget outcomes: Empirical evidence from local governments in Spain," Working Papers 2005/2, Institut d'Economia de Barcelona (IEB).
    • Handle: RePEc:ieb:wpaper:doc2005-2
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    1. Saibal Ghosh, 2010. "Does Political Competition Matter for Economic Performance? Evidence from Sub‐national Data," Political Studies, Political Studies Association, vol. 58(5), pages 1030-1048, December.

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    More about this item

    Keywords

    Deficit; Local government; Political competition; Spending;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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