Mayor's political party affiliation and local outcomes: evidence from SEE

We examine how political-ideological congruence between central and municipal governments affects local governments' budgetary decisions and economic performance in Croatia and North Macedonia. We apply fixed effects models as well as a regression discontinuity methodology, using the margin of victory of the local mayor as the assignment-to-treatment variable in a local linear regression estimation context. The results show evidence of both fiscal laxity and fiscal tightening, post-election, for local authorities aligned politically with the party in government, depending on the national-institutional context. Ethnic divisions and affiliations can play a role in this.