Strategic public policy around population thresholds

Kristof de Witte, Benny Geys*, Nanna Lauritz Schonhage

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

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Abstract

Political economists have long maintained that politicians respond to both (re-)election and financial incentives. This article contributes to the latter literature by analysing whether, when and how local office-holders respond to the economic incentives embedded in exogenously imposed population thresholds leading to an increased number and remuneration of local politicians. Building on insights from the urban economics and public finance literatures, we argue that local politicians may strategically adjust fiscal and housing policies to stimulate in-migration when approaching a population threshold where their remuneration increases. Using data from all 589 Belgian municipalities over the period 1977-2016, our results confirm that approaching important population thresholds causes lower local tax rates and the granting of additional building permits (particularly for apartments). These policy changes occur early in the election cycle and, at least for housing policy, are restricted to incumbent mayors themselves expecting to benefit from crossing the population threshold.
Original languageEnglish
Pages (from-to)46-58
Number of pages13
JournalJournal of Urban Economics
Volume106
DOIs
Publication statusPublished - 1 Jul 2018

Keywords

  • Rent-seeking
  • Political agency
  • Building permits
  • Fiscal policy
  • REGRESSION-DISCONTINUITY DESIGN
  • POLITICAL FOUNDATIONS
  • PAYING POLITICIANS
  • GOVERNMENT
  • LAND
  • COMPETITION
  • CORRUPTION
  • OUTCOMES
  • ELECTIONS
  • TAXATION

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