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Ideology and Public Policies: A Quasi-Experimental Test of the Hypothesis that Left-Wing Governments Spend More

Benoît Le Maux, Kristýna Dostálová and Fabio Padovano
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Kristýna Dostálová: University of Rennes 1, CREM-CNRS, France
Fabio Padovano: University of Rennes 1, CREM-CNRS, Condorcet Center for Political Economy, France

Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS from Condorcet Center for political Economy

Abstract: In the literature it is often argued that governments on the left tend to raise tax rates and public spending more than their right-wing counterparts. We demonstrate that this result must be interpreted with caution. Not only it may reveal partisan effects, due to the direct impact of parties’ ideology on public spending, but also a selection bias, since the distribution of voters’ preferences determines the ideology of the government in office. The present research overcomes this problem of observational equivalence by applying two identification strategies, namely re-gression discontinuity design and propensity score matching. Using data from the French local public sector, we show that governments facing the same economic situation do not spend more when they are left-wing, particularly in the case of social expenditures. This result rules out the partisan-politicians hypothesis and lends support to demand driven policy selection processes.

Keywords: Public services; Party ideology; Redistribution; Partisan effects; Selection bias (search for similar items in EconPapers)
JEL-codes: H72 H40 D72 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe and nep-pol
Date: 2017-01
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