Revealed political favoritism: evidence from the allocation of state lottery grants in Israel

Momi Dahan, Itamar Yakir*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

This paper explores whether rules-based allocation is an effective tool for restraining political favoritism. We exploit a policy shift in distributing state lottery revenues to Israeli municipalities from discretion-based to rules-based allocation to estimate the extent of political favoritism. By comparing the likelihood of receiving grants by two types of localities before and after a policy reform, our approach offers a complementary empirical strategy for studying political favoritism that can be used even in the absence of exogenous variation in political connections; it likewise may reveal the overall impact of multiple political interests and social affiliations on favoritism. We find that political favoritism toward Jewish (versus Arab) and affluent (versus less affluent) municipalities diminished significantly after the reform but has not yet disappeared along the ethnic dimension. Our results suggest that adopting rules-based allocation might be effective in coping with political favoritism.

Original languageAmerican English
Pages (from-to)387-406
Number of pages20
JournalPublic Choice
Volume190
Issue number3-4
DOIs
StatePublished - Mar 2022

Bibliographical note

Publisher Copyright:
© 2021, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.

Keywords

  • Grant allocation
  • Local government
  • Political favoritism
  • Rules vs. Discretion

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