The Green Party’s impact on environmental investments : evidence from Finnish municipalities

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Title: The Green Party’s impact on environmental investments : evidence from Finnish municipalities
Author: Kurtti, Tia
Other contributor: Helsingin yliopisto, Valtiotieteellinen tiedekunta
University of Helsinki, Faculty of Social Sciences
Helsingfors universitet, Statsvetenskapliga fakulteten
Publisher: Helsingin yliopisto
Date: 2021
Language: eng
Thesis level: master's thesis
Degree program: Taloustieteen maisteriohjelma
Master's Programme in Economics
Magisterprogrammet i ekonomi
Specialisation: Taloustieteen yleinen opintosuunta
General track
Allmänna studieinriktningen
Abstract: This thesis asks whether the Greens' increased political power in local councils following the results of the municipal election in 2017 has caused an increase in investments in environmental protection in Finnish municipalities in 2018 and 2019. To answer this question and to gauge causal relationship, a difference-in-differences model is employed for which 294 municipalities located in mainland Finland are divided in treatment and control groups, depending on whether the Greens had become one of the three biggest parties measured in vote share in municipal election in 2017 or not, respectively. The data used in the analysis extend from 2008 to 2019 and are freely available in the Official Statistics of Finland database. While climate change is a global problem, local actions are also needed. Actions to tackle the climate change are often political and they are taken by politicians. In Finland's case, some actions are directed by the European Union, some of the legislation comes from the Finnish government and some decisions are made in municipalities by local politicians. A vast field of economics is devoted to studying the causes and consequences of policies and political decisions, that is political economy. This thesis contributes to the vast field of political economics literature by explaining the relationship of local government decision-making and politics in general and in detail, as it focuses to the relationship of an individual party and municipality's investment decisions. The size of the Finnish local government is remarkable which is why it is fair to claim that municipalities play a significant role in implementing national regulation but also in making their own decisions. The Greens is profiled as a pro-environmental alternative in Finnish politics. In the platform for the 2017 election the party emphasized the impact of municipalities in the battle against the climate change. In the 2017 municipal election the Greens was the fourth largest party winning 534 seats while gaining 212 seats from 2012 election. Nationwide, the vote share of the Greens increased by 4 percentage points from the previous municipal election. The statistically significant estimates show a negative causal relationship between the investments in environmental protection and the Greens’ increased political power. In those 18 municipalities, in which the Greens reached a top 3 position in the 2017 municipal election, the municipalities spend on average 1.09 euros per capita less in investments in environmental protection compared to their counterfactuals in the post-treatment period. When controlling for the Greens' vote share, the difference extends to 1.42 euros per capita. As robustness checks, other linear models estimating the relationship between the investments in environmental protection and the Greens’ increased political power in all mainland Finland municipalities are employed. The results of the robustness checks show that the decrease in environmental investments in treated municipalities does not apply for those municipalities, in which the Greens has had more power for longer period.
Subject: difference-in-differences
local elections
municipality data
partisan hypothesis
political economy

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