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Title:Do politicians free-ride? An empirical test of the common pool model PDF Logo
Authors:Tyrefors, Björn
Issue Date:2006
Series/Report no.:SSE/EFI Working Paper Series in Economics and Finance 626
Abstract:In the twentieth century there was a significant trend towards larger local governments through amalgamations in the western world. Amalgamations provide potential economic benefits but might also give rise to costs driven by opportunistic political behavior. This study uses a compulsory amalgamation reform of municipalities in Sweden to test for such behavior. The reform gives a local government incentives to accumulate debt before the amalgamation takes place, since the cost will be shared by all tax payers in the new municipality. The strength of this incentive to free ride will be determined by the locality's population size, relative to the future size of the new locality. We find an economically large and statistically significant free riding effect and the result is robust.
Subjects:common pool
amalgamations
free riding
local government
difference-in-difference
JEL:D72
E62
H70
Document Type:Working Paper
Appears in Collections:SSE/EFI Working Paper Series in Economics and Finance, EFI - The Economic Research Institute, Stockholm School of Economics

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