Effect of the Political System on Local Financial Condition: Empirical Evidence for Spain's Largest Municipalities

摘要

The significant relationship between public spending and political system has led to a considerable increase in the studies being carried out to analyze how the latter affects public spending, debt, and fiscal pressures. Given the effect that municipal finance has on the quantity and quality of the public services that future generations will enjoy, the aim of this study is to analyze the effect that political ideology and strength have on local government management overall through analysis of the financial condition. With this goal in mind, the study applied panel data methods that allow unobservable heterogeneity to be controlled to a sample of 153 of Spain's largest municipalities for the 1988-2008 period. The results show that the municipalities governed by progressive political parties are worse off financially than those governed by conservatives. Likewise, strong citizen support guarantees greater budgetary solvency.