The Power of Parties: Evidence from Close Municipal Elections in Norway

• DOI: http://doi.org/10.1111/sjoe.12229
• Date: 01 January 2018
• Author: Jon H. Fiva,Rune J. Sørensen,Olle Folke
• Published date: 01 January 2018

©The editors of The Scandinavian Journal of Economics 2017.

Scand. J. of Economics 120(1), 3–30, 2018

DOI: 10.1111/sjoe.12229

The Power of Parties: Evidence from Close

Municipal Elections in Norway*

JonH.Fiva

BI Norwegian Business School, NO-0442 Oslo, Norway

jon.h.fiva@bi.no

Olle Folke

Uppsala University, SE-751 20 Uppsala, Sweden

olle.folke@statsvet.uu.se

Rune J. Sørensen

BI Norwegian Business School, NO-0442 Oslo, Norway

rune.sorensen@bi.no

Abstract

We show that small shifts in representation can affect policy in proportional election

systems. Using data from Norway, we find that a larger left-wing party leads to more

property taxation, higher childcare spending, and lower elderly care spending, while

local public goods appear to be a non-partisan issue. These effects are partly due to

shifts in bloc majorities, and partly due to changes in the left–right position of the

council, keeping the majority constant. The estimates on spending allocations are rather

imprecise, but they are consistent with evidence on politicians’ fiscal preferences and

patterns in media attention.

Keywords: Fiscal policy; proportional representation; regression discontinuity design

JEL classification:C23; D72; H71; H72

I. Introduction

The 2007 local elections in the Norwegian municipality of Gjøvik was

a close race. The left-wing parties obtained 23 of the 45 seats on the

council. The right-wing parties were approximately one percentage point

*We thank Jens Blom-Hansen, Ron Freier, Julian Garritzmann, Askill Halse, Macartan

Humphreys, Thomas Meyer, Mikael Persson,Thomas Scotto, Dan Smith, Fredrik Willumsen,

Chris Wlezien, the anonymous referees, and participants at several universitiesand conferences

for their insightful comments. This paper was written as part of the research activities at

the Center of Equality, Social Organization, and Performance (ESOP) at the Department

of Economics, University of Oslo. ESOP is supported by the Research Council of Norway

through its Centers of Excellence funding scheme, project number 179552. Data and supporting

materials required to reproduce the numerical results are available at www.jon.fiva.no.

4Power of parties: evidence from elections in Norway

away from winning a seat majority. In an interview published 12 days

before Election Day, the lead candidate of the right-wing Progress Party

claimed that the two most important issues for his party were better

elderly care and the removal of property taxation.

What would have been the fiscal policy consequences had the Progress

Party gained an additional seat? If a seat was won at the expense of a

left-wing party, a right-wing majority might have abolished the property

tax, increased spending on elderly care, and possibly cut spending on

other services. Would we have seen similar effects if the Progress Party

had won an extra mandate at the cost of a right-wing party, that is,

while maintaining the left-wing majority? This is the central issue in the

current paper: do parties matter only when they are decisive for seat

majorities? Or does proportional representation allow parties to matter

even when majorities are fixed? In a leading contribution, Lijphart (1999)

argues that minority parties do exert political influence. The current study

provides evidence in support of this important hypothesis.

In theoretical terms, political parties represent the supply side of

democratic politics. Just as we expect firms to matter in economic markets,

we expect parties to matter in democratic markets. In the economic market,

a positive shift in supply results in lower prices. In politics, the expected

result of a shift from a left-wing to a right-wing majority is to reduce taxes.

Such policy changes can result from shifts in demand or supply, that is,

they might be caused by changes in voter preferences or party platforms.

We address the supply-side effects – that is, how partisan representation

affects public policy when voter preferences are fixed (Strøm, 1990a,

p. 570; Cox, 1997, pp. 6–7). There is a vast body of literature in economics

devoted to estimating how supply affects prices. The empirical literature

on democratic supply-side effects is less well developed, especially with

regard to proportional representation (PR) systems. This paper aims to

contribute to filling that gap.

We define the “power of parties” as the policy shifts resulting from

a change in political representation, holding other factors constant. In

majoritarian election systems, political power is simply a dichotomous

variable defined by the party that gains a majority of seats in the

legislature. In PR systems, individual parties within and outside the

governing coalitions can also exert influence on policy. We rely on two

regression discontinuity (RD) designs specifically tailored to capturing

these aspects of PR systems. To capture the majoritarian dimension of

political representation we build on Pettersson-Lidbom (2008). To capture

the effect of individual parties we use the RD design developed by Folke

(2014). To the best of our knowledge, our study represents the first attempt

to jointly estimate how seat majorities and the representation of individual

parties affect policy outcomes.

©The editors of The Scandinavian Journal of Economics 2017.