Essays in Public Finance and Political Economy

Abstract

This collection of essays provides an empirical investigation on political institutions and electoral systems. All of the chapters use a regression discontinuity design and exploit the framework of Spanish municipalities. Chapter 1, which is forthcoming in Political Science Research and Methods, compares turnout under closed-list proportional representation and under an open-list, plurality-at-large system in which voters can vote for individual candidates from the same or different party-lists. This chapter finds that the open-list system increases turnout by between 1 and 2 percentage points, which suggests that introducing competition both across and within parties leads to more voter turnout. Chapter 2 compares economic policy in direct and representative democracy. Using data from the budgets of the municipal governments, it finds that direct democracy in the form of open town meetings leads to a smaller government, reducing public spending and revenues by 4%. Consistent with a model in which direct democracy allows voters to curb special-interest spending, all of the difference is driven by current expenditures, while capital (infrastructure) expenditures are not affected. Chapter 3, joint with Thomas Fujiwara, presents a finding that is difficult to reconcile with previous literature on legislative bargaining and government formation, which mostly derives a party's bargaining power from its number of seats. Using data from more than 3,000 local elections in which two parties tie in seats, it shows that the party with slightly more votes is substantially more likely to appoint the mayor (form a government). This is a surprising result, as it implies that there is a "first-place" effect that is strong enough to override any other consideration that parties may take into account when forming coalitions, such as ideological affinity. The effect holds not only when the two most voted parties tie in seats, but also in ties between the second and third most voted parties. The chapter provides evidence that is consistent with voters enforcing a norm of the most-voted party forming the government: second-placed parties that form the government are "punished" by voters in the subsequent election. These results imply the existence of some degree of first-past-the-post in proportional representation.