Office-seeking under demographic change: immigration, coalition government, and municipal budget reallocation in Sweden

Abstract This paper examines how local governments adjust public budgets following immigration-induced demographic change. It argues that office-seeking incumbents reallocate fiscal resources towards newcomers if these are expected to become voters within a short time horizon. Such adjustments are constrained by uncertainty within governing coalitions over who will capture any resulting electoral gains. The argument is evaluated using data from 290 Swedish municipalities between 2014 and 2023. Empirically, the analysis relates annual changes in budget shares across 11 expenditure categories to annual changes in the local non-EU foreign-born population share. The findings show that larger increases in the non-EU population share are associated with budgetary reallocation towards spending areas that are particularly relevant to these groups. Ideological differences between left- and right-leaning governing coalitions do little to condition these reallocations, whereas broader coalitions exhibit weaker fiscal adjustment. The paper contributes to public choice and political economy research by showing that fiscal responses to demographic change take the form less of uniform expansion than of strategic budget recomposition, and that such adjustment is weaker where coalition partners are uncertain about the distribution of electoral gains.