Between a rock and a hard place? The relationship between political competition and public finances at the local level
Keywords:
municipalities, parties, elections, municipal elections, party systemsAbstract
Municipalities are key players in the Finnish welfare state model, and how municipalities manage their budgets affects the sustainability of the entire system. In this study, we ask whether and how the level of political competition in local elections is connected to the variation in the financial standing of Finnish municipalities. We expect that political variables associated with the competitiveness of the local political system are connected in non-linear ways to central budgetary aggregates measuring the level of spending and the adequacy of income financing of the activities of the local government. Specifically, we expect that intermediate levels of competition are conducive of outcomes that are in line with the efficient and sustainable use of public funds, while both extremely low and extremely high levels of competition induce special-interest politics and short-termism. An analysis of data covering the municipalities of mainland Finland from 2001 to 2014 suggests that the level of spending has a U-shaped relationship with the fractionalisation of the party system. We also find some evidence suggesting that the adequacy of income financing increases with the level of electoral turnout but that connection is somewhat uncertain.
