The influence of independent local parties on spending: Evidence from Dutch municipalities

Abstract

Do independent local parties make different decisions on municipal finances compared to their national counterparts? In this paper, we empirically analyze whether independent local parties affect public finances in Dutch municipalities. Using a matching strategy, we compare municipalities that are similar in their observable characteristics except for the presence of an independent local party majority in the municipal council. We provide evidence that shows that municipalities with independent local majorities indeed differ in terms of local spending, specifically they spend more on categories of Local Public Administration, Public Health and Environment and Culture and Recreation which are arguably more local-oriented. We extend our analysis by looking at the local effects of local independent majorities. Using a regression kink design, we find consistent results if we look at the changes that take place once the majority share of the seats in the municipal council has been reached by independent local parties.