Compromise Under Pressure: Political Competition and Public Spending

• In Event: The Political Economy of Voting

Abstract

A recent literature on distributive politics in developing democracies argues that increased electoral competition can lead to more fragmented government, which can make it harder to agree on public spending and reduce public goods provision. This paper puts forward an argument where divided government can increase the redistributive pressure for a polity if both branches face strong electoral competition. The reason is that under divided government both parties have to deliver benefits to their respective constituencies compared to one constituency under unified government. These incentives let politicians to agree on spending where expected electoral benefits can be shared, but to disagree on those that can be targeted to a specific constituency. The paper tests the proposition in the Philippines using a novel regression-discontinuity design exploiting the fact that different branches of the local government are elected in separate first-past-the past elections. Using observational variation in electoral competition for different offices and as-if random variation in divided government, I show that divided government increases social welfare transfer, and reduces taxes on property and businesses, but only if both actors face strong electoral competition. Spending for targetable public goods remained unchanged.

Author

• Felix Hartmann, Humboldt-Universität zu Berlin