Mariana Lopes da Fonseca

Electoral Competition and Endogenous Political Institutions: Quasi-Experimental Evidence from Germany

Do established parties change political institutions to disadvantage new political actors if the latters’ electoral prospects improve? We study this question with a natural experiment from the German federal state of Hesse. The experiment is an electoral reform for local elections that improved the electoral prospects of smaller parties and party rebels. However, local politicians from the large mainstream parties could adjust municipal political institutions in such a way as to counteract this effect of the reform. One such institutional adjustment was to reduce the size of the local council because a reduction in council size raises the implicit electoral threshold and thus disadvantages especially smaller parties. Using a dataset that covers all 426 Hessian municipalities over the period 1989–2011, we document with a difference-in-discontinuities design that municipalities where the electoral competitiveness of smaller parties improved more after the reform saw a larger reduction in their council size. Hence, established parties appear to erect barriers to entry by adjusting political institutions once new political actors become viable electoral alternatives.

Identifying the source of incumbency advantage through an electoral reform

This study relies on a constitutional reform introducing term limits at the local elections level in Portugal as a natural experiment to estimate incumbency advantage in mayoral elections. It stresses the distinction between partisan and personal incumbency advantage using data on six local elections in 278 homogenous municipalities from 1993 to 2013. The analysis is based on two quasi-experimental methods, the RD and diff-in-disc designs, that allow for credible inference upon the source and magnitude of the incumbency advantage. Main contributions include one of the first estimates of partisan incumbency advantage in the literature and the use of a novel method in its estimation. Results show that whilst the returns to incumbency accruing to the candidate are positive and significant, there is no evidence of a significant partisan incumbency advantage. In addition, robustness test point to a potential role of term limits in causing political turnover.

The Economics and Empirics of Tax Competition: A Survey and Lessons for the EU

We survey the theoretical and empirical literature on local and international tax competition in Economics. On the basis of this survey, we discuss whether EU countries should harmonise tax policies to prevent a race to the bottom. Much of the evidence suggests that tax competition does not lead to significant reductions in tax revenues. Therefore, we conclude that tax coordination is in all likelihood unnecessary to prevent inefficiently low levels of taxation in the EU. But since the evidence against the adverse effects of tax competition is not unambiguous, we also discuss whether intergovernmental transfers might be a less invasive means than outright tax harmonisation to prevent a race to the bottom.

Electoral Thresholds and the Success of Minor Parties

In 2001, the state parliament of the German federal state of Hesse abolished a 5 percent legal electoral threshold for local elections. This reform had a stronger effect on municipalities with larger councils because implicit electoral thresholds decrease with council size. Exploiting discontinuities in a state law that exogenously maps population to council size, we implement a difference in discontinuity design to study the political consequences of abolishing an electoral threshold. The dataset covers all 426 Hessian municipalities over the period 1989-2011. Our results suggest that the seat and vote shares of small parties increased in municipalities that were affected more strongly by the abolishment. In addition, municipalit ies exposed to stronger treatments reduced their council size, presumably to limit political competition.We exploit a natural experiment to study the political consequences of explicit electoral thresholds. The natural experiment in question is an electoral reform in the German federal state of Hesse. In 2001, the state parliament abolished the five percent electoral threshold for local elections. The abolishment of the threshold had, on average, a stronger effect on municipalities with larger councils since implicit electoral thresholds are inversely correlated with council size. Using a dataset that includes all 426 Hessian municipalities over the period 1989 to 2011 and exploiting discontinuities in a state law that exogenously maps population to council size, we implement a difference-in-discontinuity design for identification. Our results show that the seat and vote shares of small parties increased in municipalities affected more strongly by the reform. These political effects are primarily due to the reform’s psychological rather than the mechanical consequences. We also find that the reform had no effect on voter turnout. These findings suggest that abolishing an existing threshold improves the electoral prospects of smaller parties. It does, however, not increase voter participation.

Tax Mimicking in Local Business Taxation: Quasi-experimental Evidence from Portugal

I exploit an exogenous reform introducing a local business tax in Portugal to study tax mimicking among jurisdictions. The identification strategy relies on a quasi-experimental difference-in-differences methodology and heterogeneity in treatment intensity. Results provide evidence of significant short-run tax mimicking that decreases over time. I study possible generating processes underlying the strategic interaction among municipalities and find significant evidence of electoral concerns. These electoral concerns are not met with electoral consequences at the local elections, which may be behind the diffusion of local business taxation in the long run.

Re-evaluating the economic costs of conflicts

This paper studies the economic costs of conflicts at the country and ethnic group settlement level with light output data as measured by orbital satellites and conflict data spatially mapped to latitude and longitude coordinates. Using a worldwide dataset of 7,704 individual ethnic group settlements of 862 ethnic groups in 177 countries, we find that conflicts strongly reduce light output in settlements directly affected by fighting over the period 1992-2008. In addition, conflicts have large negative spillovers both across and within countries: light output in settlements not directly exposed to fighting declines significantly once a conflict begins; neighboring countries also experience large negative effects. The negative effects of conflicts are particularly pronounced in Eastern Europe, but also observable in sub-Saharan Africa, Latin America, and South and South-East Asia. In contrast, conflicts have, on average, no negative effects on light output in the Middle East and in the West. We contrast these results with cross-country regressions with GDP data, which suggest much smaller negative effects of conflicts.

Lame But Loyal Ducks

This paper analyzes the consequences of an electoral reform introducing mayoral term limits at the municipal level in Portugal. Relying on a difference-in-difference methodology and a novel method that accounts for anticipatory effects of reforms, this study explores variation between and within municipalities to capture the economic and political consequences of limiting the number of consecutive mayoral terms. In contrast to the usual lame duck effect in the literature, I find that term limited mayors decrease current expenditure and reduce both user charges and tax rates. Lame ducks send positive fiscal signals possibly in an attempt to maximize the electoral perspectives and re-election probability of their party in the coming elections. Still, political turnover significantly increases as a result of the electoral reform.