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dc.contributor.authorFreier, Ronnyen_US
dc.contributor.authorOdendahl, Christianen_US
dc.description.abstractThis paper estimates the effect of political power on tax policies in municipal councils under a proportional election system. The main challenge in estimating the causal effect of parties on policy is to isolate the effect of power from underlying voter preferences and the selection effect of parties. We use an instrumental variable approach where close elections provide the exogenous variation in our variable of interest: voting power. Using data from German municipalities in the state of Bavaria, our estimation results suggest that power does matter. Somewhat surprisingly, the center-left party SPD is found to lower all three locally controlled taxes, whereas The Greens increase both property taxes considerably. These results remain robust across a range of specifications. What is more, the effect of the SPD is confirmed by a simple regression discontinuity estimation of mayors in these local governments.en_US
dc.publisher|aDeutsches Institut für Wirtschaftsforschung (DIW) |cBerlinen_US
dc.relation.ispartofseries|aDIW Discussion Papers |x1205en_US
dc.subject.keywordlocal taxationen_US
dc.subject.keywordlocal electionen_US
dc.subject.keywordmunicipality data instrumental variable approachen_US
dc.titleDo parties matter? Estimating the effect of political power in multi-party systemsen_US
dc.typeWorking Paperen_US

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