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Strategic public policy around population thresholds

Author

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  • De Witte, Kristof
  • Geys, Benny
  • Schönhage, Nanna Lauritz
Abstract
Political economists have long maintained that politicians respond to both (re-)election and financial incentives. This article contributes to the latter literature by analysing whether, when and how local office-holders respond to the economic incentives embedded in exogenously imposed population thresholds leading to an increased number and remuneration of local politicians. Building on insights from the urban economics and public finance literatures, we argue that local politicians may strategically adjust fiscal and housing policies to stimulate in-migration when approaching a population threshold where their remuneration increases. Using data from all 589 Belgian municipalities over the period 1977–2016, our results confirm that approaching important population thresholds causes lower local tax rates and the granting of additional building permits (particularly for apartments). These policy changes occur early in the election cycle and, at least for housing policy, are restricted to incumbent mayors themselves expecting to benefit from crossing the population threshold.

Suggested Citation

  • De Witte, Kristof & Geys, Benny & Schönhage, Nanna Lauritz, 2018. "Strategic public policy around population thresholds," Journal of Urban Economics, Elsevier, vol. 106(C), pages 46-58.
    • Handle: RePEc:eee:juecon:v:106:y:2018:i:c:p:46-58
    DOI: 10.1016/j.jue.2018.06.001
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    More about this item

    Keywords

    Rent-seeking; Political agency; Building permits; Fiscal policy;
    All these keywords.

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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