61 Rethinking local government: Essays on municipal reform - VATT

Antti Moisiorepresentation in Finnish municipalities, with a special focus onvoting behaviour in the context of municipal mergers. Citizen-votersmay benefit from having a <strong>local</strong> representative in the council fora number of reasons. First, if households with similar preferenceshave a tendency to sort into same municipalities or neighborhoods,a councilor living close to a voter is more likely to share thepreferences of the voter in terms of the service-tax bundle providedby the municipality. The second reason why <strong>local</strong> representation maybe important is related to the common pool problem. If there areidentifiable (geographic) <strong>local</strong> groups within a municipality thatbenefit from spending in their area and if the spending is financedglobally by all taxpayers in the municipality, having a <strong>local</strong>representative may be instrumental in receiving the benefits from<strong>local</strong> spending. Third, if councilors and voters consume similarservices and dislike travel costs, a councilor living close to a voteris more likely to share the voter’s preferences over the geographiclocation of public services. Furthermore, since house values are tiedto the prevalence and quality of (public) services in the neighborhood,house value becomes an incentive device that may aligncouncilors’ and voters’ preferences. In this case, both the citizenvoterand the councilor want to promote policies that increaseneighborhood quality.The empirical analysis of Saarimaa and Tukiainen is based on aunique individual candidate and polling district level data. Usingthis information, each merged municipality is decomposed into theoriginal pre-merger municipalities so that the vote distributions ofcandidates can be traced back to the pre-merger municipal level. Theresearchers then perform a difference-in-differences analysis wherethe unit of observation is the pre-merger municipality and the votingdata comes from elections before (2004) and after (2008) the seriesof mergers.The authors find that municipal mergers lead voters to concentratetheir votes on those <strong>local</strong> candidates that seem to defend thegeographic location of public services best. This effect is the largerthe farther away the municipality is from its larger merger partner.11