Mediating distributive politics: political alignment and electoral business cycle effects on municipality financing in Greece

Research output: Contribution to journalArticlepeer-review

Authors

Colleges, School and Institutes

External organisations

  • Joint Research Centre (JRC) - European Commission’s Science Service

Abstract

We examine the role of political alignment and the electoral business cycle on municipality revenues in Greece for the period 2003-2010. The misallocation of resources for political gain represents a waste of resources with significant negative effects on local growth and effective decentralization. The focus of our analysis is municipality mayors since they mediate the relationship between central government and voters and hence can influence the effectiveness of any potential pork-barrelling activity. A novel panel dataset combining the results of two local and three national elections with annual municipality budgets is used to run a fixed-effects econometric model. This allows us to identify whether the political alignment between mayors and central government affects municipality financing. We examine this at different stages of local and national electoral cycles, investigating both direct intergovernmental transfers (grants) and the remaining sources of local revenues (own revenues, loans). We find that total revenues are significantly higher for aligned municipalities in the run-up to elections due to higher intergovernmental transfers. We also find evidence that the 2008 crisis has reduced such pork-barrelling activity. This significant resource misallocation increases vertical networking dependency and calls for policy changes promoting greater decentralization and encouraging innovation in local revenue raising.

Details

Original languageEnglish
JournalAnnals of Regional Science
Early online date29 Jan 2021
Publication statusE-pub ahead of print - 29 Jan 2021

Keywords

  • distributive politics, intergovernmental grants, electoral cycles, clientelism, decentralisation, partisanship

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