The question of whether the rich exert disproportionate influence over policymaking has fueled extensive research, with evidence showing a pro-rich bias. This research largely focuses on higher levels of government, while local politics remains underexplored. At the local level, studies primarily examine resource allocation outcomes, suggesting the rich benefit more from infrastructure and the poor from consumptive public services.
Other research explores what drives local resource allocation: Are politicians seeking to optimize re-election chances, or are city agencies prioritizing efficiency to benefit the greatest number of people? Evidence is mixed, though efficiency appears to dominate.
This paper combines these strands of literature: First, it investigates what drives local resource allocation: socio-economic overrepresentation, electoral considerations, or efficiency concerns. Second, it analyzes whether the rich or the poor disproportionately benefit from outcomes of these processes. By examining all municipal investment spending, this paper takes a more comprehensive approach than prior research.
While earlier research has been conducted in various countries, there has been very little on Germany, despite its size and high degree of local autonomy, likely due to the heterogeneity of municipal reporting practices. This paper draws on a novel dataset covering 23 German cities over 16 years. Homogeneity was achieved by focusing on cities in North Rhine-Westphalia large enough to avoid shared county responsibilities and by working with administrations to clarify reporting practices. It includes investment spending, rent prices, demographics, welfare quotas, and election results at the district level. To assess efficiency concerns, it also incorporates geographical measures of centrality.