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Disentangling the fiscal effects of local constitutions

Jarosław Kantorowicz and Köppl–Turyna, Monika
Authors registered in the RePEc Author Service: Monika Irena Köppl-Turyna ()

Journal of Economic Behavior & Organization, 2019, vol. 163, issue C, 63-87

Abstract: We apply a regression discontinuity design to verify how constitutional rules, such as electoral systems, shape budget revenues at the subnational governmental level. We take advantage of a natural experiment involving an institutional reform at the local level in Poland. The reform introduced two electoral rules, which changed according to an exogenous population threshold: smaller municipalities used majoritarian elections and larger municipalities used proportional elections. While intergovernmental grants increased in both small and large municipalities, they increased less in municipalities with majoritarian elections compared to jurisdictions with proportional representation. This has further implications regarding the level of property taxes and vertical fiscal imbalance. The jurisdictions with proportional electoral systems had lower revenues from property taxes and higher vertical fiscal imbalance than jurisdictions with majoritarian systems. We show that this effect works through the alignment channel, which is driven by the political alignment of mayors with parties in the central government. This is more prevalent in proportional election scenarios. We also demonstrate that these effects are more pronounced in the period after 2002, when direct elections of mayors were introduced.

JEL-codes: D72 D78 H72 R50 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Disentangling fiscal effects of local constitutions (2017) Downloads
Working Paper: Disentangling fiscal effects of local constitutions (2017) Downloads
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DOI: 10.1016/j.jebo.2019.05.013

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