The Effect of Political Alignment on Transfers to Portuguese Municipalities

Authors


Corresponding author: Marco Migueis, Board of Governors of the Federal Reserve System, 20th and C Streets, NW, Washington, DC 20551, USA. E-mail: mmigueis@gmail.com

Abstract

I investigate if political alignment between central and local governments brings financial benefit to local governments, using financial data from Portuguese municipalities (1992–2005). I use regression discontinuity design to determine the effect of political alignment per se on transfers to municipalities. Municipalities aligned with the central government receive 19% more targetable transfers than unaligned municipalities. I test for electoral motivation of this transfer bias: extra transfers increase the vote share of incumbents in local elections for one of the two Portuguese major parties; however, municipal incumbency does not lead to better results in national elections.

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