14th journées Louis-André Gérard-Varet

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Political Connections and Alignment: Evidence from Intergovernmental Grants in France
Brice Fabre

Last modified: 2015-03-13

Abstract


This paper provides new evidence on the politics of intergovernmental grants and raises the issue of political connections in Local Public Finance. Using a new dataset on financial accounts of French municipalities, I look at two effects. The first, never studied to my knowledge, is a multiple offices effect (whether a municipality whose mayor has also an office in an upper layer gets more grants from this layer). The second is an alignment effect (whether upper tiers of government give more grants to mayors of their political affiliation). For identification, I use a Regression Discontinuity Design in close electoral races. I show that aligned mayors who have concurrently a seat in an upper level of government get double the amount of grants received by other aligned municipalities. However, mayors who have a seat in an upper tier but are not in the upper council's majority do not manage to get more funds for their municipality. These results suggest that connections play an important role in the allocation of intergovernmental grants. As for the alignment effect, I find robust evidence that aligned municipalities receive more grants only when the number of multiple office-holders in the upper council is low. This contrasts with the previous literature on alignment effect. Favouring aligned municipalities may not be the most profitable option for grantors, that is why they may practice other types of targeting.


Keywords


Intergovernmental Grants; Political Connections; Alignment; Political Competition