Majority governments and investment: evidence from Portuguese Municipalities

Theory predicts that coalition governments spend more than majorities. Focusing on Portuguese municipal governments over the period between 1993 and 2012, we empirically investigate whether majorities invest less than coalition governments. Using a two step methodology which consists of exploring discontinuities in government type and comparing municipalities which changed their type of government around the discontinuity with those that did not, we are able to isolate a causal e ect. Contrary to the theoretical predictions, we nd that mayors that are able to hold a majority in the City Hall Council signi cantly increase their investment relative to those who are not. This result is in line with others in the empirical literature, such as Freier and Odendahl (2012) and Garmann (2014)