43 research outputs found
A Test of the Rational Electoral-Cycle Hypothesis
This paper develops a three-step empirical methodology to test the rational electoralcycle hypothesis. The first step consists of testing for the existence of electoral cycles in fiscal policy. The second step conducts three tests for how such cycles should depend on election outcomes as suggested by recent political agency models. The third step is to regress electoral success on fiscal policy. This three-step approach is applied to a panel of Swedish local governments with more than 2000 observations from elections. The findings are as follows: (i) spending is raised and taxes are cut in the election year, (ii) in the election year, spending is higher for a government that will be re-elected as compared to those that will not be re-appointed, (iii) in the post-election year, spending is higher and taxes are lower for re-elected governments than for newly elected ones, (iv) reelected governments spend less and tax more in the post-election year as compared to the election year, (v) conditional on taxes, spending is positively related to electoral success. These set of findings are consistent with Rogoff’s equilibrium budget cycle model where a government signals its competence through cycles in fiscal policy.political agency; electoral budget cycles; accountability
Do Parties Matter for Fiscal Policy Choices? A Regression-Discontinuity Approach
This paper presents a method for measuring the causal effect of party control on fiscal policy outcomes. The source of identifying information comes from an institutional feature of the election system, namely that party control changes discontinuously at 50 percent of the vote share, i.e., a party that receives more than 50 percent of the votes will be in office. The approach is applied to a very large panel data set from Swedish local governments, which offers a number of attractive features. The results show that there is large and significant party effect: on average, left-wing parties spend and tax 2.5 percent more than right-wing governments. The party effect constitutes 1 percent of average municipality income, clearly a sizeable effect.political parties; party control; regression-discontinuity design
An Empirical Approach for Evaluating Soft Budget Constraints
In this paper, we develop an empirical framework for detecting the existence and estimating the magnitude of the softness of a budget constraint. The defining feature of a soft budget constraint is a subordinate organization’s expectations of being bailed out by a superior organization in case of financial trouble. This implies that one has to link the organization’s expectations for being bailed out to its fiscal behavior in order to quantify the extent of the soft budget constraint. We postulate that expectations for bailouts are formed rationally and make use of an instrumental variable method to get consistent estimates of the parameters of interest. We argue that past own experience of being bailed out and bailouts of other subordinate organizations can be used to construct credible instruments for the formation of bailout expectations. We apply our empirical approach to a unique panel data set of 286 Swedish local governments where the central government provided a total of 1,697 bailouts between 1974 and 1992. Our results strongly suggest the existence of a soft budget constraint; a local government increases its level of debt by 6-10 percent if it expects to be bailed out with probability one as compared to when the likelihood is zero due to previous experience of being bailed out, while the effect on debt from bailouts of its geographical neighbors is roughly four times as large.Soft budget constraint; Bailout; Fiscal distress; Intergovernmental relations
Does the Size of the Legislature Affect the Size of Government? Evidence from a Natural Experiment
Previous empirical studies have found a positive relationship between the size of the legislature and the size of government. Those studies, however, do not adequately address the concerns of endogeneity. In contrast, this paper exploits an exogenous variation in the size of the legislature induced by a statutory law linking council size to the number of eligible voters in Swedish local governments. The statutory law can potentially create discontinuities between number of eligible voters and council size at certain known values. These discontinuities are used to construct instrumental variable estimates of the effect of council size on government size. In contrast to previous findings, the results show that an increase of the council size leads to a statistically and economically significant decrease in spending and revenues. On average, spending and revenues are decreased by roughly 0.5-0.8 percent for each additional council member.government size; legislature; regression-discontinuity design; natural experiment
Does child spacing affect children’s outcomes? Evidence from a Swedish reform
In this paper, we provide evidence of whether child spacing affects the future success of children. As an exogenous source of variation in child spacing, we make use of the introduction of an administrative rule in the parental leave benefit system in Sweden. This rule made it possible for a woman to retain her previous high level of parental leave benefits, i.e., 90 percent wage replacement, without entering the labor market between births provided that the interval between the births did not exceed 24 months. The rule had a much larger effect on the birth spacing behavior for native-born mothers compared to foreign-born mothers due to their differential attachment to the labor market. We find that the rule caused a reduction in spacing among native-born mothers as compared to the foreign-born mothers. For individuals born by native-born mothers, the reform also caused a decrease in educational attainment. Thus, this suggests that the effect of spacing children closer has a negative impact on children’s future outcomes. We provide additional evidence that this is likely due to the strong effects of early environment on the capacity for human skill development as discussed by Knutsen et al. (2006).Child spacing; parental leave; child school performance
Behavior under social pressure: empty Italian stadiums and referee bias
This paper studies how social pressure affects the behavior of soccer referees. We make use of an attractive source of exogenous variation in the number of spectators at matches. Due to recent hooligan violence, the Italian government has implemented a regulation that forces some soccer teams to temporarily play home matches in empty stadiums. We find that referees punish away players more harshly and home players more lightly when the games are played in front of spectators compared to when they are not. This indicates that referees exhibit home bias caused by social pressure from the spectators
Does child spacing affect children's outcomes? Evidence from a Swedish reform
In this paper, we provide evidence of whether child spacing affects the future success of children. As an exogenous source of variation in child spacing, we make use of the introduction of an administrative rule in the parental leave benefit system in Sweden. This rule made it possible for a woman to retain her previous high level of parental leave benefits, i.e., 90 percent wage replacement, without entering the labor market between births provided that the interval between the births did not exceed 24 months. The rule had a much larger effect on the birth spacing behavior for native-born mothers compared to foreign-born mothers due to their differential attachment to the labor market. We find that the rule caused a reduction in spacing among native-born mothers as compared to the foreign-born mothers. For individuals born by native-born mothers, the reform also caused a decrease in educational attainment. Thus, this suggests that the effect of spacing children closer has a negative impact on children's future outcomes. We provide additional evidence that this is likely due to the strong effects of early environment on the capacity for human skill development as discussed by Knutsen et al. (2006)
Female Representation but Male Rule? Party Competition and the Political Glass Ceiling
A large literature has studied the context that affects womens numerical representation, but few have moved beyond numbers to study the drivers of a gender gap in political influence among elected politicians. Using panel data for the careers of 35.000 Swedish municipal politicians over six election cycles we first document the said gender gap. Women are substantially less likely to be re-elected for office, which is the most important pre-condition for obtaining influential appointments. Turing to the determinants we find that supply factors, primarily family responsibilities, explain some of this gap. Meanwhile, demand factors such as experience, age, education and income do not. Finding that competition between political parties closes the gap, we argue that a negative bias against women among party selectors thrives in contexts where meritocracy is not enforced. Positive correlations between competition and measures of competence for elected politicians of both genders further support this conclusion
Does the Size of the Legislature Affect the Size of Government? Evidence from Two Natural Experiments
Previous empirical studies have found a positive relationship between the size of legislature and the size of government. Those studies, however, do not adequately address the concerns of endogeneity. In contrast, this paper uses variation in legislature size induced by statutory council size laws in Finland and Sweden to estimate the causal effect of legislature size on government size. These laws create discontinuities in council size at certain known thresholds of an underlying continuous variable, which make it possible to generate ?near experimental? causal estimates of the effect of council size on government size. In contrast to previous findings, I find a negative relationship between council size and government size: on average, spending and revenues are decreased by roughly 0.5 percent for each additional council member.Aiempien tutkimusten mukaan julkisten päätöksenteko-organisaatioiden koon kasvu aiheuttaa julkisten menojen kasvua. Siten kansanedustajien tai kunnanvaltuutettujen määrän kasvu lisäisi julkisia menoja. Tutkimuksissa ei kuitenkaan ole huomioitu sitä, että suuri julkinen sektori kasvattaa myös päätöksenteko-organisaatioiden kokoa. Tämän endogeenisuusongelman poistaminen on tämän tutkimuksen keskeinen tavoite. Tutkimuksen aineisto koostuu Suomen ja Ruotsin kunnanvaltuustojen kokotiedoista. Valtuustojen kokoa säätelevät lait, joiden mukaan tietyn asukaskokoluokan kunnissa on oltava tietty määrä valtuutettuja. Säännöstö antaa mahdollisuuden testata valtuustojen koon muutoksen vaikutusta julkisiin menoihin tilanteessa, jossa kunnan asukasluku kasvaa vain vähän. Tulosten mukaan valtuuston koon ja menojen välillä on negatiivinen yhteys. Siten yhden uuden valtuutetun tulo valtuuston jäseneksi pienentää kunnan menoja ja tuloja keskimäärin noin 0,5 prosenttia