Parties, institutions and political budget cycles at the municipal level

Marika Cioffi (), Giovanna Messina () and Pietro Tommasino
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Marika Cioffi: Bank of Italy

No 885, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We study the magnitude, the determinants and the electoral consequences of pre-electoral fiscal manipulation by incumbent politicians. To this aim, we build a dataset covering all the Italian municipalities. We document several facts. First, there is a clear political cycle in the path of expenditures, driven by capital outlays. Second, only mayors not affiliated to a national political party induce an election-driven expenditure cycle. Third, pre-electoral expenditure boosts increase re-election prospects of the incumbent only if she is not affiliated to a party. These results are consistent with the hypothesis that national parties have both the incentives and the resources to curb the pre-electoral profligacy of party-affiliated mayors. We also consider the impact of formal institutions. In particular, we find that budget rules reduce the effects of the political cycle, whereas binding term limits seem to be ineffective.

Keywords: political budget cycles; local public finance; political parties (search for similar items in EconPapers)
JEL-codes: D72 H72 (search for similar items in EconPapers)
Date: 2012-10
New Economics Papers: this item is included in nep-pbe and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_885_12

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