Politician Quality, Fiscal Policy and Ideology

Abstract

Does politician quality matter for policy in representative governments? I use administrative registry data on local politicians in Finland and exploit exogenous variation generated by close electoral races that shift the quality composition of local councils to show that (i) electing more high-income, incumbent, and competent politicians (defined as those who have a higher income relative to others with similar observable characteristics) improves fiscal sustainability outcomes but does not decrease the size of the public sector, and (ii) symmetrically, electing more university-educated local councilors leads to an increase in public spending without any adverse effects on fiscal sustainability. To reconcile these findings, I combine the micro-data on electoral candidates with unique survey data on their policy positions. Politician qualities are differentially associated with economic ideology, and these correlations tally with the policy effects.