Local elites, electoral reform and the distribution of central government funds: Evidence from Romania

Abstract

How does the party affiliation of local elites influence the distribution of central government funds to territorial units? We revisit this question with the help of a new dataset on spending from Romania (2004–2011), a dataset that allows us to better understand the mechanisms linking local leaders to government spending, mechanisms that have not been systematically tested in the literature. Specifically we exploit the 2008 Romanian electoral reform in a research design that resembles a natural experiment. We identify two causal mechanisms that link the political affiliation of local elites to the receipt of government funds: (1) central leaders share the credit for the funds allocated with local leaders, and to get the most electoral benefits they are more likely to allocate funds to territories with leaders from the same party who act as vehicles for government credit claim; (2) central and local leaders engage in an exchange of perks game in which local leaders mobilize local resources in national electoral campaigns and receive in exchange funds from the government, which in turn help these local elites build a reputation and increase their re-election chances.