Selection into Politics : The Significance of Local Government Revenue

Abstract

This master thesis investigates selection effects in Norwegian local governments and explores the effect of increased revenue in local governments on the quality of politicians. Quality is measured by educational level, and we rely on commercial property tax per capita as an exogenous source of local government income. Great data on individual candidates and on aggregated municipal level let us exploit both the cross-sectional and the time-varying components of the datasets. A simple descriptive analysis is done on selection effects, while a more quantitatively analysis is conducted to find the relationship between revenue in local governments and the quality of politicians. To estimate the relationship, we employ a standard OLS analysis in addition to a fixed effects framework. First, we find that middleaged men with higher education are positively selected into local governments. Second, our empirical models suggest that there is no significant relationship between increased revenue in local governments and the quality of politicians. The sensitivity analysis implies that selection effects does not differ between non-power and power municipalities. Last, an analysis with an alternative measure of quality is done. The result suggests that there is no relationship between increased revenue in local governments and income, cleaned for gender and age effects.