Government Spending and Legislative Organization: Quasi-experimental Evidence from Germany

Peter Egger and Marko Koethenbuerger

American Economic Journal: Applied Economics, 2010, vol. 2, issue 4, 200-212

Abstract: This paper presents empirical evidence of a positive effect of council size on government spending using a dataset of 2,056 municipalities in the German state of Bavaria over a period of 21 years. We apply a regression discontinuity design to avoid an endogeneity bias. In particular, we exploit discontinuities in the legal rule that relate population size of a municipality in order to council size to identify a causal relationship between council size and public spending, and find a robust positive impact of council size on spending. Moreover, we show that municipalities primarily adjust current expenditure in response to a rise in council size. (JEL D72, H72, R51)

JEL-codes: D72 H72 R51 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/app.2.4.200
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Citations: View citations in EconPapers (92)

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