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Allocation of centrally financed public spending

Allocation of centrally financed public spending. Persson & Tabellini (2004) Do the rules of election matter for level of redistribution ? Yes = PR = increased spending gmaj < g PR BUT: How does election rules matter for ” who gets what ”? i.e the allocation of public goods ?.

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Allocation of centrally financed public spending

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  1. Allocationof centrally financedpublic spending Persson & Tabellini (2004) Do therulesofelection matter for levelofredistribution? Yes = PR = increased spendinggmaj < g PR BUT: Howdoeselectionrules matter for ”whogetswhat”? i.etheallocationofpublicgoods?

  2. Situation in Norway • Disproportinalrepresentation • Electionrule part of rigid constitution • 159 representatives from 19 districtselected to parliament. • 150 district repr. • 9 ”smoothing repr.”

  3. Norwaycont. • Principalpoint (historically): Districtswithlowervoter/populationdensity + longer distance from ”power” = higherrepresentation • Votes do not countthe same (1989-1997) Ifoslo = 1 Finnmark = 1,76 Buskerud = 0,92

  4. The model Assumptions: Politicians maximizesdistrictrepresentation, not numberofvotesnationally Votersmaximizesconsumption and localpublicgoods, butalso have ideologicalpreferences. Hypotheses: Politicians willallocatepublicgoods to districtsthat offer more seats to parliament per voter in order to maximizedistrictrepresentation in Parliamentefficiently. Politicanswillchoosedistrictswithvotersthatareideologicalhomogenic and centered, a relative smallincrease in publicgoods, willshift a large nukberofvoters. Districtswithvoterswithhighideologicalvalues, and do not appricateconsumption or publicgoodswill be neglected/recievefewerlocalpublicgoods.

  5. Local Public goods Examplesthat have been testet empirically (Norway):Road projects, militaryinstallations (Helland, Sørensen) This project: Transfers to subidize/fundinnovation, business R&D throughinstitution ”InnovationNorway” (Increasesemployment, tax base at locallevel) Principal Agent situation: Agent: InnovationNorway, Principal: Government. Agent’spreferences: ”Red” incumbant = highersubzidies, gov. interv, budgets. ”Blue” incumebant = market shouldinnovate, smallerbudgets

  6. Modelaim • Dependent variable: Fundedprojects per capita/voter in district ”j” • Independent variables: Districtdemand variables (#newbusinesses, #bancrupcies, unemployment rate, eductioanlevel, univeristy present, incubatorfacilities, tradition, naturalresources) Swing voter variables Party identifiaction, voters at ideologicalcutpoint, voters per district representative) Control variables ??

  7. Regression and pot hypo logPFPj per voter = c + log(Ddvar) + log(Svvar) + log(controls) + e Potentialhypotheses: H1 = Publicallyfundedprojectsincreases in districtsthat offer most district representatives for thefewestvotes to parliament H2 = Publicallyfundedprojectsdecreasewiththeshareofdistrictvotershavingstrong party identifycation H3 Red incumbant = increasedpublicallyfinancedprojects to red districts or ”weakblue” districts (low party id) Weexpect to findthatdistrictsthat offer more seats to Parliamentreceives more localpublicgoods

  8. Discussion • Whatdeterminesinnovation? i.eWhataffectsdistrictdemand and directionofcoefficients? • Whatareapproriatecontrol variables? • How to do theanalysis?

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