Ideology and Fiscal Policy: Quasi-Experimental Evidence from the German States

49 Pages Posted: 3 Nov 2012

Date Written: October 31, 2012

Abstract

Is government ideology important for fiscal policy? I study this question with data from all German States over the period 1975-2005. To identify the effect of ideology, I rely on a fuzzy regression discontinuity design. I find that left-wing state governments spend more than state governments with right-wing and mixed ideology. Deficits of left-wing governments are larger than those of right-wing governments but smaller than those of governments with mixed ideology. These results are robust to sensitivity tests.

Keywords: Government ideology, Fiscal policy, Fiscal federalism

JEL Classification: D72, D78, E62, H72

Suggested Citation

Baskaran, Thushyanthan, Ideology and Fiscal Policy: Quasi-Experimental Evidence from the German States (October 31, 2012). Available at SSRN: https://ssrn.com/abstract=2169232 or http://dx.doi.org/10.2139/ssrn.2169232

Thushyanthan Baskaran (Contact Author)

University of Goettingen (Göttingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

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