Voting, taxes, and heterogeneous preferences: Evidence from Swedish local elections

In this paper, we investigate whether voters' reactions to tax changes depend on their preferences for public spending, in order to increase our understanding of the relationship between accountability and the formation of public policy. Utilizing high-quality survey data, we find that voters who, ex ante, prefer a small public sector punish incumbents who raise taxes, while voters who prefer a large public sector reward tax hikes. Our results indicate that Swedish voters do not necessarily consider tax hikes to be an indication of misbehaving incumbents and that public policy is formed as a result of competing interests between voters with different policy preferences, rather than only as a conflict between rent-seeking politicians and voters.