Journal of Monetary Economics2013-09-05 2:57 AM

The impact of unions on municipal elections and urban fiscal policies

Highlights • The paper analyzes the decentralized provision of public goods in U.S. cities. • Municipal unions influence the outcome of local elections via endorsements. • Challengers strongly benefit from union endorsements in competitive elections. • Endorsed challengers tend to adopt more union friendly fiscal policies than incumbents. Abstract The efficient decentralized provision of public goods requires that special interest groups, such as municipal unions, do not exercise undue influence on the outcome of municipal elections and local fiscal policies. We develop a new political economy model in which a union can endorse one of the candidates in a local election. A politician that prefers an inefficiently large public sector can, therefore, win an election if the union can provide sufficiently strong support during the campaign. We have assembled a unique data set that is based on union endorsements that are published in leading local newspapers. Our empirical analysis focuses on municipal elections in the 150 largest cities in the U.S. between 1990 and 2012. We find that challengers strongly benefit from endorsements in competitive elections. Challengers that receive union endorsements and successfully defeat an incumbent also tend to adopt more union friendly fiscal policies.

KEYWORDS

SHARE & LIKE

COMMENTS

ABOUT THE AUTHOR

Journal of Monetary Economics

The Journal of Monetary Economics is a peer-reviewed academic journal covering research on macroeconomics and monetary economics. It is published by Elsevier and was established in October 1973 by Karl Brunner and Charles I. Plosser.

0 Following 0 Fans 0 Projects 39 Articles

SIMILAR ARTICLES

Highlights • Friedman rule assumes a source of finance: lump-sum taxation. • Lump-sum taxes are like a debt obligation. • If people are permitted to

Read More

Highlights • We link the boom that preceded the "Great Recession" and the eventual bust together. • Expected gains from financial innovations may hav

Read More

Highlights • Endogenous investment booms and busts arise in a rational expectations framework. • Aggregate distortions exist despite the design of op

Read More

Highlights • An economy where defaulters lose collateral and exclusion occurs probabilistically. • A higher exclusion probability implies better enfo

Read More

Highlights • The regional availability of bond and bank financing induces debt inflexibility. • Inflexibility limits the firm's ability to replace ba

Read More

Highlights • We study economic growth through eliminating rather than augmenting non-reproducible factors. • We obtain the balanced growth path and c

Read More

Highlights • This paper shows that investor sentiment helps account for the forward premium puzzle. • The same mechanism helps account for other styl

Read More

Highlights • Macro model with banks. • Bank runs and endogenous bank capital. • Risk taking channel. • Endogenous risk formation. • Optimal an

Read More

Highlights • Government investment in public capital forecasts high risk premiums. • Result is in contrast with negative link between private invest

Read More

Highlights • We propose two system-based identification-robust methods for DSGE models. • Valid under weak identification and auxiliary assumptions

Read More