61 Rethinking local government: Essays on municipal reform - VATT

Tuukka Saarimaa – Janne Tukiainenissue. It could be, for example, that voters in the municipalities thatended up merging have more homogenous preferences than votersin municipalities that did not merge. 10 Nonetheless, if the central<strong>government</strong> is going to force mergers on municipalities, <strong>local</strong>representation and the location of public services should be amongthe key issues that need to be resolved in the process.Second, this paper contributes to the large literature on strategicvoting. 11 Both economists and political scientists have been forlong interested in whether voters vote sincerely (always vote theirpreferred candidate) or strategically (vote someone else than theirpreferred candidate, because it is optimal once accounting forexpectations concerning other voters’ behavior). This distinctionis fundamental for the understanding of the democratic process ingeneral, formulating theoretical models in political economy anddesigning election mechanisms. Despite the massive theoretical (e.g.Besley and Coate 1997 and Myatt 2007) and empirical (e.g. Cain1978, Cox 1998 and Karp et al. 2002) literature on the topic, crediblecausal evidence is scant. To our knowledge, the only existing causaltest of strategic voting theory is by Fujiwara (2011), who usesregression discontinuity design and finds causal evidence in favor ofDuverger’s law. 12 Our paper can be seen as a causal test of strategicbehavior of voters as we basically ask whether voters desert theirpreferred <strong>local</strong> candidate in order to guarantee <strong>local</strong> representation inthe post-merger council.The rest of the paper is organized as follows. In section 5.2, weraise some theoretical arguments on why <strong>local</strong> representationmay matter to voters. Section 5.3 presents a short overview of theinstitutional setting of Finland with respect to the role and natureof <strong>local</strong> <strong>government</strong>s, election mechanisms and the merger process.In Section 5.4, we describe our data and formulate our empirical10 The results from Saarimaa and Tukiainen (2012) support this claim.11 Lyytikäinen and Tukiainen (2012) show using regression discontinuity design thatvoters in Finnish municipal elections are rational, i.e. they account for the probability oftheir vote affecting election outcomes when they decide whether to vote or abstain. Giventhat these voters are rational, it makes sense to ask whether they are also strategic.12 Duwerger’s law asserts that a plurality rule election system (or first past the postrule) tends to favor a two-party system over multipartyism because of strategic voting.135