This paper presents empirical evidence of a positive effect of council size on government spending using a dataset of 2,056 municipalities in the German state of Bavaria over a period of 21 years. We apply a regression discontinuity design to avoid an endogeneity bias. In particular, we exploit discontinuities in the legal rule that relate population size of a municipality in order to council size to identify a causal relationship between council size and public spending, and find a robust positive impact of council size on spending. Moreover, we show that municipalities primarily adjust current expenditure in
response to a rise in council size. (JEL D72, H72, R51)
Egger, Peter, and Marko Koethenbuerger.
"Government Spending and Legislative Organization: Quasi-experimental Evidence from Germany."
American Economic Journal: Applied Economics,
Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
State and Local Budget and Expenditures
Finance in Urban and Rural Economies