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Granting votes: exposing the political bias of intergovernmental grants using the within-between specification for panel data

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Abstract

Instead of alleviating fiscal inequalities, intergovernmental grants are often used to fulfill the grantors’ political goals. This study uses a unique panel dataset on more than 500 Croatian municipalities over a 12-year period to uncover the extent to which grant distribution is biased owing to grantors’ electoral concerns. Instead of the default fixed effects approach to modelling panel data, we apply a novel within-between specification aimed at uncovering the contextual source of variation, focusing on the effects of electoral concerns on grant allocation within and between municipalities. We find evidence of a substantial political bias in grant allocations both within and between municipalities, particularly when it comes to local-level electoral concerns. The paper offers researchers a new perspective when tackling the issue of politically biased grant allocation using panel data, particularly when they wish to uncover the simultaneous impact of time-variant and time-invariant factors, or when they cannot apply a quasi-experimental approach because of specific institutional contexts.

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Notes

  1. Other papers that used a panel dataset either applied a more suitable methodological choice corresponding to their datasets (e.g., Dellmuth and Stoffel 2012 use a parametric Tobit regression, while Cadot et al. 2006 estimate a simultaneous equations model) or have applied quasi-experimental approaches. For example, Brollo and Nanicini (2012), Curto-Grau et al. (2012) and Baskaran and Hessami (2017) all use regression discontinuity designs, Sollé-Ollé and Sorribas-Navarro (2008a, b) use a differences-in-differences estimation, while Veiga and Pinho (2007) apply a generalized methods of moments estimator wherein they use first-differencing to remove individual unobserved effects and estimate their relationship of interest using levels of the lagged dependent variable serving as an instrument.

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Acknowledgements

Josip Glaurdić and Vuk Vuković wish to thank Irena Kravos of the Croatian Electoral Commission, Ivanka Purić of the Croatian Bureau of Statistics, Mirna Valinger of the Croatian Tax Administration, and in particular to Maruška Vizek of the Institute of Economics, Zagreb for invaluable help with data collection. The article has benefited from comments and suggestions by Andrew Bell and Kelvyn Jones, and two anonymous reviewers. Josip Glaurdić is also grateful to the Leverhulme Trust and the Isaac Newton Trust (ECF-2012-399\7) which supported his work on this study.

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Authors and Affiliations

  1. Institute of Political Science, University of Luxembourg, Maison des Sciences Humaines, Porte des Sciences 11, L-4366, Esch-sur-Alzette, Luxembourg

    Josip Glaurdić

  2. Department of Politics and International Relations, University of Oxford, Manor Road Building, Manor Road, Oxford, OX1 3UQ, UK

    Vuk Vuković

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  1. Josip Glaurdić
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Correspondence to Vuk Vuković.

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Glaurdić, J., Vuković, V. Granting votes: exposing the political bias of intergovernmental grants using the within-between specification for panel data. Public Choice 171, 223–241 (2017). https://doi.org/10.1007/s11127-017-0435-y

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