The effect of the major's political party on municipal spending variables

Background: How much the major's political party can affect policy results at municipal level? The literature has investigated the interaction between political parties and the voters in the formation of policies, focusing on the United States and European countries. However, the contexts in which these investigations have been carried out are very different to Chile. In particular, regarding the countries that the literature has analyzed, where the primaries are the norm and any candidate is able to challenge the incumbent major, in Chile the partisan leaders have greater discretion to decide where to make primaries. Methodology: Using a panel that includes data from 2001 to 2016, we estimate the results through a discontinuous regression design (RD). The variables used this study are investment in infrastructure, transfers to education and health, expenses on municipal personnel and on social programs. Results: We find that the major's political affiliation has no effect on the municipal expenditures such as investment, municipal staff, education, health and social programs. One hypothesis that would explain these findings is that majors are unable to make budgetary changes due to institutional restrictions such as the lack of budget allocations, the role of the municipal council, and lack of interaction with other State institutions. Alternatively, by separating the sample according to the level of support of the municipal council and the alignment with the political sign of the central government, we find that, under certain conditions, there would be differences in social programs expenses which tend to be higher in the case of majors belonging to center-left parties. Conclusions: Given the restrictions imposed by the Chilean institutions, the expenses on social programs become the only tool that majors can use to apply the concepts of expenditure management according to their parties ideology. However, this would only happen depending on the configuration of the municipal council and the political alignment with the current central government. Consequently, the bulk of the Chilean municipal expense policy would not vary according to the preferences of voters and/or the major.