Party Ideology and Fiscal Policy: Quasi-experimental Evidence from the German States
Abstract: Is government ideology important for fiscal policy? I study this question with both aggregated and disaggregated public spending data from the German States over the period 1975-2010. To identify the effect of ideology, I rely on a fuzzy regression discontinuity design. I find that aggregated expenditures under left-wing state governments are higher than under right-wing governments. An analysis for different spending categories indicates that ideological differences are particularly important for education and social expenditures. The results are consistent with the view that politicians are policy rather than office motivated.
