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The causes of legal rents extraction: evidence from Spanish municipalities

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Abstract

This paper analyzes the causes of legal political rent extraction by using a direct measure of it, namely, local top politicians’ wages. In particular, we investigate whether local politicians’ incentives to extract rents by setting their own wages are influenced by the degree of political competition and voter information. We use a sample of the largest Spanish municipalities over the years 2008–2010. The results indicate that weaker political competition and lesser voter information are related to more rent extraction. In an additional analysis, we show that higher wages do not ensure better financial management. These findings confirm that when politicians can set their own salaries, higher wages do not mean better management, but they are just political rents.

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Notes

  1. The “demonstration effect” is used to describe the impact that the actions of some individuals have on the behavior of a given individual. As for corruption, it refers to the fact that the levels of corruption in a place may induce neighbors to get involved in corruption as well.

  2. Persson and Tabellini (2000) state that rents are monetary transfers in the form of salaries for top politicians and public funding of political parties.

  3. See Sect. 3. Since top politicians enjoy greater freedom to determinate their own salaries when they govern in majority than when they govern in minority, we tackle this issue in our model by controlling for the degree of political competition in the municipal council.

  4. See in this respect, Peichl et al. (2013).

  5. The political parties at the Spanish national level also operate in local governments. There are, therefore, two main national parties at the local level: “PSOE” (progressive) and “Partido Popular” (conservative).

  6. See Table 6 (Appendix 1) for additional analysis' results.

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Acknowledgments

This study has benefited from the financial support of the Spanish National R&D Plan under research project ECO2010-20522 (Spanish Ministry of Science and Innovation). It has also received support from the Ministry of Education (University’s Teacher Training, under the National Plan for Scientific Research, Development and Innovation 2008–2011).

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Authors and Affiliations

  1. Department of Accounting and Finance, Faculty of Economics and Business, University of Murcia, Campus of Espinardo, 30100, Murcia, Spain

    Bernardino Benito, Francisco Bastida, Ana-María Ríos & Cristina Vicente

Authors
  1. Bernardino Benito
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  2. Francisco Bastida
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  3. Ana-María Ríos
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  4. Cristina Vicente
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Corresponding author

Correspondence to Bernardino Benito.

Appendix 1

Appendix 1

See Table 5 and 6.

Table 6 Municipal financial management
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Benito, B., Bastida, F., Ríos, AM. et al. The causes of legal rents extraction: evidence from Spanish municipalities. Public Choice 161, 367–383 (2014). https://doi.org/10.1007/s11127-014-0206-y

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