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Revealed political favoritism: evidence from the allocation of state lottery grants in Israel

Momi Dahan () and Itamar Yakir ()
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Itamar Yakir: Hebrew University

Public Choice, 2022, vol. 190, issue 3, No 9, 387-406

Abstract: Abstract This paper explores whether rules-based allocation is an effective tool for restraining political favoritism. We exploit a policy shift in distributing state lottery revenues to Israeli municipalities from discretion-based to rules-based allocation to estimate the extent of political favoritism. By comparing the likelihood of receiving grants by two types of localities before and after a policy reform, our approach offers a complementary empirical strategy for studying political favoritism that can be used even in the absence of exogenous variation in political connections; it likewise may reveal the overall impact of multiple political interests and social affiliations on favoritism. We find that political favoritism toward Jewish (versus Arab) and affluent (versus less affluent) municipalities diminished significantly after the reform but has not yet disappeared along the ethnic dimension. Our results suggest that adopting rules-based allocation might be effective in coping with political favoritism.

Keywords: Political favoritism; Grant allocation; Local government; Rules vs. Discretion (search for similar items in EconPapers)
JEL-codes: H71 H72 R51 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Revealed Political Favoritism: Evidence from the Allocation of State Lottery Grants in Israel (2019) Downloads
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DOI: 10.1007/s11127-021-00941-7

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