Allocation of centrally financed public spending Persson & Tabellini (2004) -Do the rules of election matter for level of redistribution? -Yes = PR = increased spending gmaj < g PR -BUT: How does election rules matter for ”who gets what”? i.e the allocation of public goods?

Situation in Norway Disproportinal representation Election rule part of rigid constitution 159 representatives from 19 districts elected to parliament. 150 district repr. 9 ”smoothing repr.”

Norway cont. Principal point (historically): Districts with lower voter/population density + longer distance from ”power” = higher representation Votes do not count the same ( ) If oslo = 1 Finnmark = 1,76 Buskerud = 0,92

The model Assumptions: Politicians maximizes district representation, not number of votes nationally Voters maximizes consumption and local public goods, but also have ideological preferences. Hypotheses: Politicians will allocate public goods to districts that offer more seats to parliament per voter in order to maximize district representation in Parliament efficiently. Politicans will choose districts with voters that are ideological homogenic and centered, a relative small increase in public goods, will shift a large nukber of voters. Districts with voters with high ideological values, and do not appricate consumption or public goods will be neglected/recieve fewer local public goods.

Local Public goods Examples that have been testet empirically (Norway): Road projects, military installations (Helland, Sørensen) This project: Transfers to subidize/fund innovation, business R&D through institution ”Innovation Norway” (Increases employment, tax base at local level) Principal Agent situation: Agent: Innovation Norway, Principal: Government. Agent’s preferences: ”Red” incumbant = higher subzidies, gov. interv, budgets. ”Blue” incumebant = market should innovate, smaller budgets

Model aim Dependent variable: Funded projects per capita/voter in district ”j” Independent variables: District demand variables (#new businesses, #bancrupcies, unemployment rate, eductioan level, univeristy present, incubator facilities, tradition, natural resources) Swing voter variables Party identifiaction, voters at ideological cut point, voters per district representative) Control variables ??

Regression and pot hypo logPFPj per voter = c + log(Ddvar) + log(Svvar) + log(controls) + e Potential hypotheses: H1 = Publically funded projects increases in districts that offer most district representatives for the fewest votes to parliament H2 = Publically funded projects decrease with the share of district voters having strong party identifycation H3 Red incumbant = increased publically financed projects to red districts or ”weak blue” districts (low party id) We expect to find that districts that offer more seats to Parliament receives more local public goods

Discussion What determines innovation? i.e What affects district demand and direction of coefficients? What are approriate control variables? How to do the analysis?