Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 240: Working paper No. 240 Bloc – party Politics and Economic Outcomes. What Are the Effects of Local Parties?

Erik Lakomaa () and Martin Korpi ()
Additional contact information
Erik Lakomaa: Stockholm School of Economics, Postal: Stockholm School of Economics, Sweden
Martin Korpi: The Ratio institute, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden

Abstract: In a much cited 2008 article, Per Pettersson-Lidbom uses regression discontinuity to test for Swedish party effects on economic policies such as municipal taxation, spending and employment. We reassess the issue using the same estimator as Pettersson-Lidbom but new data on all factual coalitions, including minority coalitions as well as those previously deemed as undefined on a left and right wing political scale (constituting about 20 percent of the sample used in Pettersson-Lidbom’s study). This makes it possible to remove a systematic bias against centre-right coalitions in Pettersson-Lidbom’s study. We find that a majority of the previous findings stand, with sometimes even slightly stronger effects, but not as regards the proportional income tax rate and number of government employees per capita. Parties seem to matter for economic outcomes, but not always, and some parties more than others.

Keywords: Democracy; Voting behaviour; Economic policy; Political systems

JEL-codes: C21; D72; D78; H71; H72

16 pages, December 31, 2014

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