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Political fragmentation and projected tax revenues: evidence from Flemish municipalities

Politische Zersplitterung und erwartete Steuereinnahmen: Empirische Belege aus flämischen Gemeinden

Stijn Goeminne, Benny Geys and Carine Smolders (carine.smolders@ugent.be)

Discussion Papers, Research Unit: Market Processes and Governance from WZB Berlin Social Science Center

Abstract: The level of revenues pocketed by a government during the fiscal year often deviates from that projected by this government in its budget. Despite a flourishing literature on, for example, the technical or procedural determinants of such forecast errors, little is yet known about how political stratagems may affect forecast errors. In the present paper, we analyse whether differences in the level of government fragmentation are useful in explaining local government tax revenue forecast errors – controlling for various other factors. Using data on 242 Flemish municipalities for the period 1992-2002, we find that two-party governments are more optimistic than single-party governments. In contrast to our initial expectations, governments with at least three parties are significantly more careful (or less optimistic) in their revenue projections than single- or twoparty governments.

Keywords: Revenue projections; forecast accuracy; local taxation; Flemish municipalities; government fragmentation (search for similar items in EconPapers)
JEL-codes: D72 H72 H79 (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (8)

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