Rewarding Allegiance: Political Alignment and Fiscal Outcomes in Local Government

Christa Brunnschweiler and Samuel Kwabena Obeng
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Samuel Kwabena Obeng: University of East Anglia

No 2020-05, University of East Anglia School of Economics Working Paper Series from School of Economics, University of East Anglia, Norwich, UK.

Abstract: We examine how local governments’ political alignment with central government affects subnational fiscal outcomes. In theory, alignment could be rewarded with more intergovernmental transfers, or swing voters in unaligned constituencies could be targeted instead. We analyze data from Ghana, which has a complex decentralized system: District Chief Executives (DCEs) are centrally-appointed local administrators loyal to the ruling party, while district MPs may belong to another party. A formula for transfer distribution aims to limit the influence of party politics. Using a new dataset for 1994-2014 and a regression discontinuity design, we find that despite this system, districts with aligned MP and DCE receive more transfers, have higher district expenditure, and more internally generated funds. Results are strongest for a subsample of constant districts over the period, suggesting that municipal fragmentation has weakened political alignment effects. We also show strong electoral cycle effects, and find a crowd-in effect for Ghanaian districts.

Keywords: fiscal federalism; political alignment; flypaper effect; Ghana; regression discontinuity (search for similar items in EconPapers)
JEL-codes: D72 H7 H87 O55 (search for similar items in EconPapers)
Date: 2020-08-10
New Economics Papers: this item is included in nep-pol and nep-ure
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Working Paper: Rewarding allegiance: Political alignment and fiscal outcomes in local government (2023)
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