Do Politicians Reward Core Supporters? Evidence from a Discretionary Grant Program

42 Pages Posted: 9 Nov 2016

See all articles by Bjoern Kauder

Bjoern Kauder

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Niklas Potrafke

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Markus Reischmann

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Date Written: September 29, 2016

Abstract

We investigate whether politicians award intergovernmental grants to core supporters. Our new dataset contains information on discretionary project grants from a German state government to municipalities over the period 2008-2011. The results show that discretionary grants were awarded to municipalities with many core supporters of the incumbent state government. Discretionary grants per capita increased by about 1.4 percent when the vote share of the incumbent party in the state election increased by one percentage point. The fiscal capacity of a municipality does, by contrast, not predict the level of discretionary grants. We propose to trim discretionary project grants to the benefit of formula-based grants.

Keywords: intergovernmental grants, discretionary grants, fiscal equalization, core supporters, electoral motives

JEL Classification: D720, H720, H770, H810

Suggested Citation

Kauder, Bjoern and Potrafke, Niklas and Reischmann, Markus, Do Politicians Reward Core Supporters? Evidence from a Discretionary Grant Program (September 29, 2016). CESifo Working Paper Series No. 6097, Available at SSRN: https://ssrn.com/abstract=2866857

Bjoern Kauder

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Niklas Potrafke (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Markus Reischmann

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

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