Essays on political economy

Abstract

In this thesis I use the ban of a political party – Batasuna - as a natural experiment to answer three questions in political economics. The first chapter is about whether vote choices are instrumental or expressive. After its ban, Batasuna called for a null vote, which has expressive but no instrumental value. I exploit the heterogeneity in the pre-ban presence of Batasuna and in the enforcement of the ban across municipalities and elections to show that null voters are two thirds of the potential Batasuna voters. Null votes lower the electoral threshold, raising the instrumental incentives to vote for smaller parties, but the behavioural effect of the ban on city councils' fragmentation is close to zero. In a region with salient identity politics, the results are consistent with prevalent expressive voting. The second chapter is about the effects of government fragmentation on government spending. Since the effects the ban are mostly mechanical because a large fraction of Batasuna voters cast null votes, the ban triggers a proportional reshuffling of seats in city councils which in some cases changes the majority status of the local government. I compare policy changes in municipalities where the ban triggered a change in government fragmentation with policy changes in municipalities where the ban did not change the majority status of the local government, within municipalities where Batasuna used to be equally important. I find that absolute majorities reduce current spending significantly but increase capital expenditures, consistently with common pool and veto player models. In the third chapter I evaluate the effects of the ban after its end, exploiting its heterogeneous length across municipalities. I find a negative effect of a longer ban on electoral support for Batasuna in local elections, driven both by a lower number of candidatures and less votes received. These effects are persistent for two at least two elections and have spillovers to regional elections. The extension of the ban triggered a spike in street terrorism for one month, but overall it had no effects since it slightly reduced street terrorism during the year after.