Politics, Government Spending, and Growth: Evidence from Greece

Abstract

I study the allocation of pork barrel spending, and the impact of politics on regional growth in Greece, using a large dataset that covers the period between 1959 and 2010. I find that electoral districts that lean towards the majority party receive more spending from the central government, and grow faster. Theoretically, this association could be either because parties reward the regions that vote for them, because majority MPs divert funds towards their constituencies, or both. Since, the electoral law by design creates some quasi-random variation in the allocation of parliamentary seats, it is possible to distinguish the effect of voting for the “right” party from the effect of being represented by the “right” people. The electoral support and the representation in the parliamentary majority variables have a significant joint effect on the distribution of government spending, but the precise nature of the link is unclear. In the case of growth, there is evidence that both explanations are relevant. Finally, regions do not seem to enjoy any additional benefits when their elected representatives also occupy positions in the executive branch of the government. ∗batzilis@uchicago.edu; 1126 East 59th Street, Chicago, IL 60637