Investing in long-run partisan loyalty: Empirical evidence from post-dictatorial Greece Pantelis Kammasa , Maria Poulimab and Vassilis Sarantidesc a Athens University of Economics and Business, Patission 76, Athens 10434, Greece.
[email protected] b Department of Economics, University of Ioannina, P.O. Box 1186, 45110 Ioannina, Greece
[email protected] c Department of Economics, University of Sheffield, 9 Mappin Str, Sheffield S1 4DT, UK.
[email protected] July 7, 2019 Abstract: This paper examines the role of political incentives in the geographical allocation of public investment in 52 NUTS3-level regions in Greece during the period 1975-1989. Using a novel dataset of decomposed total public investment in nine subcategories (e.g., helath), our analysis indicates that both conservative (1975-1981) and socialist governments (1982-1989) followed vote-maximising strategies. To mitigate endogeneity concerns in our estimates, we provide this evidence based on a difference-in-difference framework that exploits the regime change that occurred in 1981 as a source of exogenous variation in the distribution of political support within the Greek territory. We argue that the main driving of the observed political distortions is long-run partisan loyalty. To put it more simply, parties that dominated in the post-dictatorial period channelled resources in regions that their ancestor pre-coup parties obtained a higher victory margin. We further argue that loyalty establishes strong personalistic networks at the regional level that in turn affect the spatial allocation of public capital. To this end, we show that loyal prefectures are more likely to have strong MP’s with deep family roots in the parliament and/or MP’s with ministerial positions that in both cases can be proven powerful weapons in resource allocation.