Do party politics still matter? Examining the effect of parties, governments and government changes on the local tax rate in Sweden

Abstract

According to partisan theory, variations in policy choices and outputs originate from the party composition of the government studied. In this study, we take a novel approach to address such assumptions by linking changes in municipal taxes with local government changes. We also add a baseline scenario in which we examine whether the composition of the local government affects tax levels. Drawing on a dataset that contains official Swedish statistics from 1994 to 2018, we find convincing support for the partisan effect. Tax levels are higher under left-wing rule, and more specifically, tax cuts particularly occur when left-wing governments are replaced by right-wing ones. These results do not vanish when controls are accounted for, while it can be particularly noticed that the condition of the municipal economy influences partisan ambitions. These findings thereby contradict prior theoretical assumptions that the local arena is free from ideological battles.