Demography, voting, and public expenditures: theory and evidence from Swedish municipalities

Do the eldery use the political system to get benefits from Swedish municipal spending at the expense of the young, and vice versa? If so, to what extent? These are the basic questions asked in this paper. To analyze this question a median voter model with altruism within families is used. The answer given by the empirical investigation is that these the effects of the intergenerational conflict on municipal spending are significant and sizeable. An increase of the relative share of spending on elderly that benefits the median voter’s family by one standard deviation increases relative spending on elderly with seven percent, holding demand constant. ∗IIES, Stockholm University, S-106 91 Stockholm, Sweden; [email protected]; http://www.iies.su.se/data/home/stromber/index.htm. I am grateful for useful comments and suggestions by Anne Case, Gene Grossman, Gunnar Jonsson, Torsten Persson, Harvey Rosen, Howard Rosenthal, and participants of the political economy workgroup at Princeton, and for help in obtaining data by Niklas Johansson at The Swedish Association of Local Authorities.