Political Selection and Economic Policy

Abstract

Does political selection matter for policy in representative governments? I use administrative data on local politicians in Finland and exploit exogenous variation generated by close elections to show that electing more high-income, incumbent, and competent politicians (who earn more than observably similar politicians) improves fiscal sustainability outcomes but does not decrease the size of the public sector. I also provide suggestive evidence that electing more university-educated local councillors leads to more public spending without adverse effects on fiscal sustainability. I reconcile these findings with survey data on candidate ideology and demonstrate that different qualities are differentially associated with economic ideology.