Abstract
Despite the considerable amount of public subsidies granted by the member states of the European Union (EU) to their national railway industries, the determinants of State aid to this particular sector are still largely unexplored from a cross-country perspective. Using official subsidy data for a sample of 25 EU countries over the period 1998–2008, this article poses the classic do-parties-matter question in comparative political economy to examine whether the political allocation of railway subsidies is completely determined by sector-specific conditions or whether it leaves room for governments’ partisan preferences. Controlling for other potential politico-economic determinants (sector size, public/private ownership, intermodal competition and so on), a multiple regression analysis indicates that government ideology in fact helps explain the considerable differences between countries with respect to rail subsidisation. Contrary to the expectations of traditional partisan theory, countries governed by left-wing (bourgeois) parties showed significantly lower (higher) subsidy levels. The article goes deeper into this regression result and discusses a number of explanations as to how this unexpected empirical finding can be explained.
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Notes
If not otherwise stated, the results of bivariate correlations reported in this article are based on average values of the respective variables for the period 1998–2008 (N=25 countries), using Eurostat data. Depending on the scale level, different correlation coefficients were appropriate and calculated: r (Pearson’s product-moment correlation coefficient), ρ (Spearman’s rank correlation coefficient), or (point biserial correlation coefficient) pbis. Where appropriate, the variables were logarithmically transformed. Levels of statistical significance: *10 per cent, **5 per cent, ***1 per cent.
The Scoreboard ‘includes all public subsidies communicated to the Commission as well as subsidies that have been notified and authorised by the Commission under relevant State aid rules. The figures exclude compensation for services of general economic interest’ (EC, 2011).
Note, however, that the ‘bourgeois’ coefficient narrowly misses the 10 per cent significance level (P⩽0.10) if Model (1) is jackknifed (that is, each country is removed in turn to test whether the results are sensitive to the exclusion of single countries): Lithuania (P-value of ‘bourgeois government’ after removing this country: 0.108), Sweden (0.113), Slovenia (0.142), the Netherlands (0.147), Luxembourg (0.154) and Portugal (0.163).
The coefficients for the right-wing parties (that is, cabinet share of bourgeois parties excluding Christian Democrats) in the different time periods continuously show a positive sign but remain statistically insignificant and are not reported.
Schmidt (2010, p. 212) notes: ‘Advanced partisan theory adds to standard partisan theory the distinction between short-term impacts and the long-term legacies of parties. Partisan effects comprise not only contemporaneous short-term impacts (measured by a party A’s cabinet seats share at a particular time point or over a shorter period), but also the long-term legacy of a party A on policy positions in that society’ (see also Castles, 2007b, pp. 29–30).
One might conjecture that subsidies, ceteris paribus, are higher in less-urbanised countries because of the need to connect rural areas. However, the coefficient of the variable ‘rural population’ (in percentage of total population; World Bank data) included as an additional control remains insignificant and does not change the presented regression results (see Model 6, Table 3).
As an additional control, we included the general size of the public sector (that is, total general government expenditure as a percentage of GDP; Eurostat data) as it captures a general propensity to rely on the public budget in order to finance public goods. The variable ‘government size’ shows the expected positive sign but remains insignificant when added to our baseline model (see Model 7, Table 3) as it is correlated with the independent variables ‘Eastern Europe’ (pbis=–0.467**) and ‘road passengers’ (ρ=–0.546***). In any case, the inclusion or exclusion of the size-of-government variable does not affect our main results.
As an alternative specification, we included a privatisation dummy getting 1 in the cases of Estonia, Denmark, the Netherlands and the United Kingdom. Moreover, we tested a UK dummy as the United Kingdom is the country with the most experience in rail privatisation. In both specifications, the respective privatisation variable was statistically insignificant (detailed regression results not reported) and did not change the results.
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Acknowledgements
For their helpful comments on earlier drafts of this article, the authors would like to thank Thorsten Hüller, Henning Schmidtke, Laura Seelkopf, Peter Starke, Stefan Traub, the three anonymous reviewers of this journal as well as participants of the 2011 Annual Meeting of the European Public Choice Society in Rennes, the 2011 Prague Conference on Political Economy and the 2011 Congress of the International Institute of Public Finance in Ann Arbor.
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Crössmann, K., Mause, K. Rail subsidisation in the European Union: An issue beyond left and right?. Comp Eur Polit 13, 471–492 (2015). https://doi.org/10.1057/cep.2014.2
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DOI: https://doi.org/10.1057/cep.2014.2