||This research attempts to examine whether economic, social, political and institutional factors affected local public expenditures (per capita) in Taiwan. The panel data regression analysis, covering the period from 1989 to 2007, used statistics from the 21 prefectures (5 cities and 16 counties) of Taiwan by applying the median voter model and political business cycle (PBC) model.|
The findings from the empirical data suggest that the explanatory variable of the median income is significant and has a positive sign as predicted by the priori expectation, with the exception of economic development expenditure. The gap between the median income and average income variables has positive signs in the total, social welfare, police and economic development expenditures. The tax share variable and grant variable on all categories of spending are significant, but the positive sign of the tax share variable contrasts a priori expectations. The population variable and population density variable have negative signs in different expenditures, while the social welfare and the education, science, and culture expenditures have positive signs. Comparing the difference before and after the downsizing of the Taiwan Provincial Government, the significance of the latter is higher than the former, and the effects of various variables differ.
The results of this research also indicated that the variables of the pre-election year, election year and post-election year demonstrated statistical significance with varying directional tendencies, and that the results are inconsistent with the traditional hypothesis of the election cycle. The incumbent magistrates or mayors, regardless of whether they do or do not intend on re-election, exhibit no significant influence on most expenditures, and thus this does not agree with a priori expectations. The administrative satisfactions of incumbent magistrates or mayors have statistically significant influence on the expenditures and deficits.
Generally, the Pan-KMT incumbent magistrates or mayors have more motives to increase the total and capital expenditures and deficits than the Pan-DPP. Interestingly, the KMT party, which held the majority of seats in the county council, has a positive sign and statistically significant influence on the expenditure of grants to townships. The evidence has demonstrated that a unified government or divided government (horizontal type or vertical type) has no significant influence on most of the expenditure forms, although a negative sign on social welfare expenditure is evident
in 21 counties and cities. The lagged deficit is significant with a positive sign, which implies that the insufficiency of local accountability and deficits are becoming a long-term problem.
When comparing the power of the median voter model and political business cycle model in explaining the local public expenditure, a non-nested test was implemented. No model was found to hold an advantage over another model.
In brief, the current research indicates that the factors of the majority voters' demands, elections and parties indeed have different influences on various expenditure forms in Taiwan.