Title: Switch towards tax centralization in Italy: A wake-up for the local political budget cycle
Citation: INTERNATIONAL TAX AND PUBLIC FINANCE vol. 26 no. 4 p. 872-898
Publisher: SPRINGER
Publication Year: 2019
JRC N°: JRC115789
ISSN: 0927-5940 (online)
URI: http://publications.jrc.ec.europa.eu/repository/handle/JRC115789
DOI: 10.1007/s10797-019-09531-2
Type: Articles in periodicals and books
Abstract: Are the incentives to expand expenditure before local elections affected by the composition of local governments' revenues? We explore this issue by exploiting the Italian government bill that in 2008 replaced the municipal tax on main residence with a vertical transfer. Relying on staggered dates of municipal elections to identify the effect of the reform, we find evidence of a political budget cycle, but only for municipalities that in 2008 were in their pre-electoral year. The result suggests that a lower degree of municipal tax autonomy strengthens the incentives to expand the size of the budget before the elections.
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