Public funding of parties and political polarization

This work analyzes the impact of asymmetric financial constraints on the platforms of parties, using a formal model of elections. The main results show that when a party faces a tight financial constraint, the platform chosen in equilibrium is further away from its ideal point compared with the case when campaign expenses are unlimited. Moreover, we show that in the presence of asymmetric budget constraints, a financially advantaged party converges to the median voter and a disadvantaged one diverges away. The strength of the latter effect depends on the salience of the policy issue in question. The results are tested by using a dataset of party positions and salience and confirm the theoretical predictions

Two-candidate competition with endogenous valence: a differential game approach

We propose a differential game approach to analyze two--candidate competition in a la Hotelling game with candidates simultaneously choosing locations and investment in valence. We find a Markov perfect equilibrium in which candidates choose divergent locations. Divergence from the median is increasing if the parameter measuring the importance of policy relative to valence is decreasing and if valence depreciates slowly. The results are generalizable to a version of the game with probabilistic voting, that is with a stochastic state equation

Opportunistic politicians and fiscal outcomes: the curious case of Vorarlberg

Using a unique set of electoral rules present in the Austrian state of Vorarlberg, we explore the question whether direct election of the mayor affects the size of local governments. Using difference-in-differences estimation and propensity score matching, we find evidence that direct elections of the mayor are associated with lower expenditure on public administration and public personnel, however compensated by higher expenditure in the visible categories of spending i.e. transportation, social protection and promotion of the economy

Two-candidate competition with endogenous valence: a differential game approach

We propose a differential game approach to analyze two--candidate competition in a la Hotelling game with candidates simultaneously choosing locations and investment in valence. We find a Markov perfect equilibrium in which candidates choose divergent locations. Divergence from the median is increasing if the parameter measuring the importance of policy relative to valence is decreasing and if valence depreciates slowly. The results are generalizable to a version of the game with probabilistic voting, that is with a stochastic state equation

How asymmetric funding of parties can lead to political polarization

This work analyzes the impact of asymmetric financial constraints on the platforms of parties using a formal model of elections. Main results show that when a party faces a tight financial constraint the platform chosen in equilibrium is further away from its ideal point compared to the case when the campaign expenses are not limited. Moreover, we have shown that the platform of the party which is facing a tighter financial constraint is further away from its ideal point than of the opponent. These results show the theoretical foundations for the empirical observations made, about the impact of public funding of parties on their platforms

How asymmetric funding of parties can lead to political polarization

This work analyzes the impact of asymmetric financial constraints on the platforms of parties using a formal model of elections. Main results show that when a party faces a tight financial constraint the platform chosen in equilibrium is further away from its ideal point compared to the case when the campaign expenses are not limited. Moreover, we have shown that the platform of the party which is facing a tighter financial constraint is further away from its ideal point than of the opponent. These results show the theoretical foundations for the empirical observations made, about the impact of public funding of parties on their platforms

Public funding of parties and political polarization

This work analyzes the impact of asymmetric financial constraints on the platforms of parties, using a formal model of elections. The main results show that when a party faces a tight financial constraint, the platform chosen in equilibrium is further away from its ideal point compared with the case when campaign expenses are unlimited. Moreover, we show that in the presence of asymmetric budget constraints, a financially advantaged party converges to the median voter and a disadvantaged one diverges away. The strength of the latter effect depends on the salience of the policy issue in question. The results are tested by using a dataset of party positions and salience and confirm the theoretical predictions

Do equalization payments affect subnational borrowing? Evidence from regression discontinuity

According to the fiscal federalism literature sub-central budget constraints become softer when local governments are more dependent on revenues over which they have no discretion. As a consequence of higher ’transfer-dependency’, sub-central governments can expect to be bailed out by the central government and therefore tend to accumulate higher levels of debt. We test this conjecture with data from Austrian municipalities. Austria is a fiscally highly centralized federation in which tax autonomy at the sub-central level is almost absent. Our identification strategy is based on a discontinuity caused by a special regulation on population weights in the tax sharing agreement between central government and the municipalities. We analyze the discontinuity in the conditional expectation of borrowing given population size to unveil an average causal effect of the treatment. Our results indicate that in line with theoretical expectations municipalities with higher revenue dependency observe higher net borrowing per capita. We also find that almost one half of the observed discontinuity works through an investment channel. Net borrowing is spatially correlated

Do equalization payments affect subnational borrowing? Evidence from regression discontinuity

According to the fiscal federalism literature sub-central budget constraints become softer when local governments are more dependent on revenues over which they have no discretion. As a consequence of higher ’transfer-dependency’, sub-central governments can expect to be bailed out by the central government and therefore tend to accumulate higher levels of debt. We test this conjecture with data from Austrian municipalities. Austria is a fiscally highly centralized federation in which tax autonomy at the sub-central level is almost absent. Our identification strategy is based on a discontinuity caused by a special regulation on population weights in the tax sharing agreement between central government and the municipalities. We analyze the discontinuity in the conditional expectation of borrowing given population size to unveil an average causal effect of the treatment. Our results indicate that in line with theoretical expectations municipalities with higher revenue dependency observe higher net borrowing per capita. We also find that almost one half of the observed discontinuity works through an investment channel. Net borrowing is spatially correlated

Employment effects of minimum wages in Europe revisited

The aim of this paper is to estimate the effect of minimum wage on employment rates taking into account potential nonlinearity. Focusing on three age groups, we find a significant nonlinear relationship between the minimum wage and employment for the young (15-24 years) and older working-age (55-64 years) groups, whereas for the prime-age workers (25-54 years) the minimum wage does not have a significant non-linear effect. Negative effect of the minimum wages on employment is stronger if the labor markets are otherwise strictly regulated and when workers are relatively unproductive