We examine whether state-level incumbents discriminate in the allocation of
transfers in favour of local governments controlled by co-partisans, and whether the
electoral prospects of local incumbents improve when they are aligned with the state
incumbent. Using a new database covering around 3,000 Spanish municipalities during the
period 2000-07 and a Regression Discontinuity design, we document a very strong and
robust effect: in close races, municipalities aligned with the regional government obtain on
average 83% more per capita transfers and their incumbents gain 10% more votes at the
local elections. We also show that the effect of alignment is stronger: (i) when regional and
local elections are held on the same day, (ii) in regions with less competitive regional
elections, and (ii) in regions with more budget resources.

Keywords: Political parties, inter-governmental transfers, pork barrel politics
(Coauthors: Marta Curto-Grau, Pilar Sorribas-Navarro)