New Evidence on Fiscal Decentralization and the Size of Government

This paper adds to the literature by utilizing improved data on tax revenue decentralization to re-examine the relationship between fiscal decentralization and the size of government. An econometric analysis using panel data from 18 OECD countries shows that fiscal decentralization matters for both the size and composition of government spending. Tax revenue decentralization is associated with a smaller public sector, while expenditure decentralization is associated with a larger public sector. The former effect seems to be driven by a reduction in social security transfers, while the latter effect seems to be driven by increased government consumption.fiscal federalism, sub-central fiscal autonomy, government expenditures, size of government

Mechanical and Psychological Effects of Electoral Reform

Duverger (1954) noted that changes in electoral systems will have two types of effects: mechanical effects, and reactions of political agents in anticipation of these, which he referred to as psychological effects. It is complicated to empirically separate the two effects since these occur simultaneously. In this paper we use a large set of counterfactual election outcomes to address this issue. Our application is based on a nationwide municipal electoral reform in Norway, which changed the seat allocation method from d’Hondt to modified Sainte-Lagüe. Even though this electoral reform is of a relatively small magnitude, we document substantial psychological effects.

Does the Housing Market React to New Information on School Quality?

This paper analyzes housing market reactions to the release of previously unpublished information on school quality. Using the sharp discontinuity in the information environment allows us to study price changes within school catchment areas, thus controlling for neighborhood unobservables. We find a substantial housing market reaction to publication of school quality indicators, suggesting that households care about school quality, and may be willing to pay for better schools. The publication effect is robust to a number of sensitivity checks, but does not seem to be permanent as prices revert to prepublication levels after two to three months. We discuss this reversion in relation to the literature on behavioral finance and the concept of limited attention.valuation of school quality, hedonic methods, price reversion

Causal Effects of Paternity Leave on Children and Parents

In this paper we use a parental leave reform directed towards fathers to identify the causal effects of paternity leave on children’s and parents’ outcomes. We document that paternity leave causes fathers to become more important for children’s cognitive skills. School performance at age 16 increases for children whose father is relatively higher educated than the mother. We find no evidence that fathers’ earnings and work hours are affected by paternity leave. Contrary to expectation, mothers’ labor market outcomes are adversely affected by paternity leave. Our findings do therefore not suggest that paternity leave shifts the gender balance at home in a way that increases mothers’ time and/or effort spent at market work.parental leave, labor supply, child development

Voting when the Stakes are High

Rational choice theories of electoral participation stress that an individual's decision to vote depends on her expected net benefit from doing so. If this instrumental motive is relevant, then turnout should be higher in elections where more is at stake. We test this prediction, by studying how turnout is affected by exogenous variation in governments’ financial flexibility to provide pork for their voters. By utilizing simultaneous elections for different offices, we identify a positive effect of election stakes on turnout.voter motivation, elections, turnout

Do re-election probabilities influence public investment?

We identify exogenous variation in incumbent policymakers’ re-election probabilities and explore empirically how this variation affects their investments in physical capital. Our results indicate that a higher re-election probability leads to higher investments, particularly in the purposes preferred more strongly by the incumbents. This aligns with a theoretical framework where political parties disagree about which públic goods to produce using labor and predetermined public capital

Do Re-election Probabilities Influence Public Investment?

We identify exogenous variation in incumbent policymakers' re-election probabilities and explore empirically how this variation affects the incumbents' investment in physical capital. Our results indicate that a higher re-election probability leads to higher investments, particularly in the purposes preferred more strongly by the incumbents. This aligns with a theoretical framework where political parties disagree about which public goods to produce using labor and predetermined public capital. Key for the consistency between data and theory is to account for complementarity between physical capital and flow variables in government production.political economics, strategic capital accumulation, identifying popularity shocks

Electoral reform and strategic coordination

Electoral reform creates new strategic coordination incentives for voters and elites, but endogeneity problems make such effects hard to identify. This article addresses this issue by investigating an extraordinary dataset, from the introduction of proportional representation (PR) in Norway in 1919, which permits the measurement of parties' vote shares in pre-reform single-member districts and in the same geographic units in the post-reform multi-member districts. The electoral reform had an immediate effect on the fragmentation of the party system, due in part to strategic party entry. The authors find, though, that another main effect of the reform was that many voters switched between existing parties, particularly between the Liberals and Conservatives, as the incentives for these voters to coordinate against Labor were removed by the introduction of PR

Health Status After Cancer: Does It Matter Which Hospital You Belong To?

Background Survival rates are widely used to compare the quality of cancer care. However, the extent to which cancer survivors regain full physical or cognitive functioning is not captured by this statistic. To address this concern we introduce post-diagnosis employment as a supplemental measure of the quality of cancer care. Methods This study is based on individual level data from the Norwegian Cancer Registry (n = 46,720) linked with data on labor market outcomes and socioeconomic status from Statistics Norway. We study variation across Norwegian hospital catchment areas (n = 55) with respect to survival and employment five years after cancer diagnosis. To handle the selection problem, we exploit the fact that cancer patients in Norway (until 2001) have been allocated to local hospitals based on their place of residence. Results We document substantial differences across catchment areas with respect to patients' post-diagnosis employment rates. Conventional quality indicators based on survival rates indicate smaller differences. The two sets of indicators are only moderately correlated. Conclusions This analysis shows that indicators based on survival and post-diagnosis employment may capture different parts of the health status distribution, and that using only one of them to capture quality of care may be insufficient

Do re-election probabilities influence public investment?

An insight from dynamic political economy is that elected officials may use state variables to affect the choices of their successors. We exploit the staggered timing of local and national elections in Norway to investigate how politicians' re-election probabilities affect their investments in physical capital. Because popularity is endogenous to politics, we use an instrumental variable approach based on regional movements in ideological sentiment. We find that higher re-election probabilities stimulate investments, particularly in purposes preferred more strongly by the incumbent parties. This aligns with theory where capital and current expenditures are considered complementary inputs to government production