Author:

Keywords:

Social Sciences, Economics, Political Science, Business & Economics, Government & Law, Distributive politics, Income redistribution, Fiscal transfers, Political representation, POLICY CHOICES, FEDERAL-FUNDS, PANEL-DATA, TRANSFERS, MODELS, ALLOCATION, EARMARKS, PARTIES, STATES, BRAZIL, 1401 Economic Theory, 1402 Applied Economics, 1606 Political Science, 3801 Applied economics, 3803 Economic theory, 4404 Development studies

Abstract:

© 2014 Elsevier B.V. This paper investigates the role of political representation in explaining geographical variation in social security and income tax transfers. To quantify the causal link going from political representation to transfers, we identify two sets of exogenous changes in political representation and use an instrumental variable approach. Using Belgian data for the 1995-2010 period, we find that transfers to inhabitants of a particular electoral district increase significantly with every extra federal minister originating from that electoral district. Given that social security and income tax transfers appear to be largely formula-based this result is surprising.