Effect of the Political System on Local Financial Condition: Empirical Evidence for Spain's Largest Municipalities

Abstract

The significant relationship between public spending and political system has led to a considerable increase in the studies being carried out to analyze how the latter affects public spending, debt, and fiscal pressures. Given the effect that municipal finance has on the quantity and quality of the public services that future generations will enjoy, the aim of this study is to analyze the effect that political ideology and strength have on local government management overall through analysis of the financial condition. With this goal in mind, the study applied panel data methods that allow unobservable heterogeneity to be controlled to a sample of 153 of Spain's largest municipalities for the 1988-2008 period. The results show that the municipalities governed by progressive political parties are worse off financially than those governed by conservatives. Likewise, strong citizen support guarantees greater budgetary solvency.

External constraints on Spanish municipal sports agencies’ finances

“…Furthermore, this method allows to control for possible endogeneity problems that usually appear in such studies, using the lagged independent variables as an instrument (Benito et al, 2013). As in previous studies, all independent variables except dummy variables were treated as endogenous in dynamic models (Benito et al, 2013;García-Sánchez et al, 2012).…”

“…The socio-demographic variables used were the size of the population and the interest groups. For the size of the population, the number of inhabitants was used, which was transformed logarithmically for all the cases as a control variable (Bastida et al, 2009;Benito et al, 2012;García-Sánchez et al, 2012;Veiga and Veiga, 2007). For the interest groups, two variables were used: the percentage of the under 17 population and the percentage of the over 65 population in relation to the total population (Benito et al, 2013;Borge, 2005;Hagen and Vabo, 2005;Solé-Ollé, 2006;Veiga and Veiga, 2007;Zafra-Gómez et al, 2009a).…”

A generalization of the power law distribution with nonlinear exponent

“…For several reasons (infrastructure investment, etc. ), they can decide to contract debt -taking into account the municipal debt control of the institutional borrowing restrictions [52,53,54,55,56,57,58,59,60,61,62]. Our data sets were composed of information of Spanish indebted municipalities, whose debt was at least one thousand euros, dated on the 31st of December of each year, in the period 2008-2014, expressed in thousand of euros (kA C), published by the Spanish Ministry of the Finance and Public Administrations (see [63]).…”

How to Improve the Financial Conditions of Local Governments in a Period of Crisis: An Explanatory Case Study

“…LGs (Lopez-Hernández, Zafra-Gómez, & Ortíz-Rodríguez, 2012;García-Sánchez, Mordán, & Prado-Lorenzo, 2012;; these financial ratios come from the private sector and are calculated on the basis of financial and budgetary information. It is worth noting that they have been introduced in the public sector under the banner of new public management (NPM) (Guthrie, Olson, & Humphrey, 1999;Broadbent & Guthrie, 2008 Moreover, in recent years, the worldwide financial crisis has led financial sustainability to become a relevant concept in public entities which is even more important than the other three features, particularly in local governments within a context with a reduction of public revenues followed by public expenditure cuts (Bailey, Valkama, & Salonen 2014;Checherita-Westphal, Hallett, & Rother 2014;IMF 2014;Pérez-López, Plata-Díaz, Zafra-Gómez, & López-Hernández, 2013).…”