The 2019 local election in Hungary accelerated the trend of centralization, marked
by a simultaneous reduction in available local funds and an increase in discretionary
transfers to local governments. This paper, utilizing a dataset encompassing all over
3000 municipalities from 2015 to 2020, employs fixed-effect estimations and a regression
discontinuity design to explore how election outcomes influenced central decisions
on intergovernmental transfers. Generally, larger municipalities are more susceptible
to political influence, particularly in the allocation of discretionary grants, whereas
smaller settlements appear less affected by political shifts. Changes in political
alignment triggered a rewarding policy for municipalities that remained or converted
to aligned status, resulting in an additional 86.4% and 65.2% of discretionary funds,
respectively, relative to those converting to or remaining unaligned. Our research
establishes that political influence in intergovernmental transfers has intensified
since 2019, offering valuable insights for the upcoming 2024 election.
