The political free-riding of municipalities: transfers, taxation and elections. An application to the Argentine case

FREILLE, SEBASTIÁN; CAPELLO, MARCELO

Toledo

Jornada; I Jornadas Iberoamericanas de Financiación Local; 2011

In this paper, we examine the impact of descentralized public policy on local
elections outcomes ?both the probability of reelection and the intensity of local
electoral competition. We build a new dataset including local elections in the
province of Cordoba for the years 2003, 2007 and 2011 and several types of fiscal
transfers from the provincial government to the local governments. We find that
the odds of reelecting local incumbents are increasing in the incumbency dum-
mies for both major parties, in the level of automatic transfers ?taken in this
paper as a proxy for economic conditions-, and increasing in the level of discre-
tionary extraordinary transfers. Interestingly, there are two caveats that apply
to the result on discretionary transfers. Firstly, discretionary transfers seem
to influence the probability of reelection in districts were these transfers are
more important as a source of financing spending ?townships and local villages?
but not in municipalities and larger cities. Secondly, when exploring some het-
erogeneity in our results, we find that the level of extraordinary discretionary
transfers improve the probability of reelection only of those incumbencies aligned
with the provincial government. Our results are robust to controlling for other
potential explanatory variables.