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Who should you vote for? Empirical evidence from Portuguese local governments

Portuguese Economic Journal volume 19, pages 5–31 (2020)Cite this article

Abstract

The economic literature considers voters quasi-rational agents that care about maximizing their individual welfare when deciding on who to vote for. Voters believe that, once a politician is elected, his or her characteristics will affect policy outcomes and consequently their private welfare. To assess whether mayors’ characteristics influence municipalities’ financial performance, I use a dataset composed of 278 Portuguese mainland municipalities from 2003 to 2016. I find that mayors’ age, education, occupation, and tenure influence the level of public investment, tax revenues, debt, and budget balances. Although most of the Portuguese voters only consider candidates’ political affiliation when deciding on who to vote for, my estimates do not show any significant impact of this characteristic on the financial indicators analyzed. Therefore, these results question the way Portuguese vote by arguing that, when voting for local government representatives, they should care about other characteristics among candidates besides their political affiliation.

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Notes

  1. Admittedly, this is a strong but needed assumption. Mainly in metropolitan areas, individuals vote where they live but also benefit from the municipality’s investment where they work for example. It is not easy to incorporate such characteristic in an empirical economic model without access to more detailed data on the households so, this will be one of the caveats of the paper.

  2. This is of crucial importance for this paper because the dataset covers both of these elections and uses only Portuguese data.

  3. The archipelagos of Madeira and Azores were established as administrative regions and their 30 municipalities are subject to an extra layer of intervention by their regional governments.

  4. Laws 159/99 and 75/2013 define the areas of intervention of the Portuguese local governments.

  5. Freguesias are the lowest administrative units in Portugal. They are assigned to municipalities and have very limited functions and resources.

  6. Law 169/99 defines the responsibilities of each of the municipalities’ branches.

  7. Portugal has a multiparty system. Moreover, elections dates are defined exogenously from the perspective of the local authorities, and all municipalities have elections on the same day, every four years. This paper covers the elections that took place on December 2001, October 2005, October 2009, and September 2013.

  8. A master thesis was presented on a similar topic at Nova School of Business and Economics by Bernardo Gonçalves. Veiga and Veiga (2019) provide a small discussion on this as well.

  9. This belief is supported by the Hausman test (Prob > χ2 = 0.9627). I do not reject the null hypothesis of the absence of correlation between the non-observable individual effects and the explanatory variables.

  10. For more discussion on two-way clustering see Petersen (2009), Thompson (2011), and Cameron et al. (2011).

  11. Data for the remaining 30 municipalities of Madeira and Azores is used for robustness checks.

  12. I am grateful to Alexandra Carapeto from DGAL for assisting me throughout the data gathering process.

  13. For a more detailed description of the variables used, please refer to Table 6, which presents their main descriptive statistics.

  14. I follow the definition for the Budget Balance variable used by Martins and Correia (2015) and Veiga and Veiga (2014) by only accounting the operational revenues and costs.

  15. I am grateful to Maria Rodrigues from DGAI for assisting me throughout the data gathering process.

  16. See an example at Appendix C.

  17. Using Portuguese data on local governments, Aidt et al. (2011) shows that higher investment levels in the election year increase the vote share differences between the incumbent and his main opponent.

  18. In Appendix B, one can see more detailed results for every dependent variable.

  19. In order to obtain the exact computation of the percentage change I have to perform the following operation to the coefficient of interest: PercentageChange = exp(β) − 1

  20. I consider all the stated effects economically significant and reasonable as further discussion suggests. These significant results also hold when I used the dependent variables in euros per capita in a previous version of this paper.

  21. The appendix for this section is available as an Online Appendix and can be requested to the author.

  22. This belief is supported by the Pesaran CD test (Prob = 0.0000). One can reject the null hypothesis of this test, therefore residuals are correlated across entities.

  23. More on this kind of positive spillover effects and the effect on underinvestment can be found in Dur and Staal (2008). Foucault et al. (2008) present empirical evidence for public spending interactions in French municipalities. Lopes and Peralta (2016) show empirical evidence for tax competition in Portuguese municipal corporate income tax.

  24. I pinpoint an outlier every time the dependent variable level increased by more than 200%.

  25. These quadratic relations are not a surprise as the inherent ability of each individual throughout his or her life is not linear. In fact, Denney and Palmer (1981) find that there is a quadratic relationship between age and “ability to solve practical problems”.

  26. The European integration had a significative impact on local governments power in the context of their financial independence from the national government. It allowed for an increase in the public investments undertaken and consequently, gave more political power to Town Councils and their mayors. See Bouvet and Dall’Erba (2010) for an in-depth approach.

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Acknowledgments

I would like to acknowledge my supervisor at Tilburg University, Louis Raes, as I am gratefully indebted for his valuable guidance. The article also benefited from insightful comments from Ana Sofia Pessoa, Filipe Correia, Francisco Veiga, Linda Veiga, Raffaella Santolini, Vasco Santos, two anonymous referees, the editor Paulo Guimarães, and participants of the 12th Annual Meeting of the Portuguese Economic Journal. Any remaining errors are mine.

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  1. Department of Economics, University of Bonn, Kaiserstraße 1, Bonn, Germany

    Ricardo Duque Gabriel

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  1. Ricardo Duque Gabriel
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Correspondence to Ricardo Duque Gabriel.

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Appendix A: Descriptive statistics

Appendix A: Descriptive statistics

Table 6 Descriptive statistics - main sample
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Table 7 Descriptive statistics with Azores and Madeira’s municipalities
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1.1 Appendix B: Estimates

Table 8 Dependent variable: log(public investment)
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Table 9 Dependent variable: log(tax revenues)
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Table 10 Dependent variable: log(debt)
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Table 11 Dependent variable: debt unsustainability
Full size table
Table 12 Dependent variable: budget balance
Full size table

1.2 Appendix C: Information bulletin

figure a

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Gabriel, R.D. Who should you vote for? Empirical evidence from Portuguese local governments. Port Econ J 19, 5–31 (2020). https://doi.org/10.1007/s10258-019-00158-z

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Keywords

  • Elections
  • Local governments
  • Mayors
  • Portugal
  • Public finance
  • Voting