The impact of independent local parties on spending: Evidence from Dutch municipalities

To what extent do independent local political parties make different decisions on municipal spending categories compared to their locally operating national counterparts? In this paper, we empirically analyze whether independent local parties affect public finances in Dutch municipalities. Using a matching strategy, we compare municipalities that are similar in their observable characteristics except for the presence of an independent local party majority in the municipal council. We provide evidence that municipalities with independent local majorities indeed differ in terms of local spending, specifically they spend more on categories of Local Public Administration, Public Health and Environment and Sport, Culture and Recreation which are arguably more locally oriented. Using a regression kink design, we find consistent results in spending when we look at the changes that take place once the majority share of the seats in the municipal council has been reached by independent local parties.