Do niche parties make a difference? The effect of extremist parties’ council representation on public policy

Abstract: This paper examines the causal effect of niche parties’ council representation on policy outcomes in Spain between 2003 and 2022. Focusing on the far-left IU and far-right VOX as niche parties, it utilizes local-level data on municipal elections. To account for possible endogeneity, I apply a regression discontinuity design using the 5% electoral admission threshold, generating quasi-experimental variation in the probability that a niche party is represented in the council. I show that if IU obtains council representation, municipal budgets shift from a surplus to a deficit. Moreover, I find large effects on revenue and spending if PSOE is forming the coalition, even if it is not the strongest party in the election. These findings suggest that IU plays a crucial role as a coalition partner, exerting a considerable influence on local policies. Conversely, there seem to be no effects of IU’s representation for single-party majority governments. This indicates that in contrast to research looking at parties’ policy positions, bargaining about resources rather than electoral competition for voters drives the results. Additionally, I provide evidence for spillover effects to the regional level, resulting in a higher level of party favoritism between regional and local governments due to IU’s council representation. Regarding VOX’s entry into the council, I find a substantial reduction in fee revenues.