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Switch toward tax centralization in Italy: a wake-up for the local political budget cycle

Massimiliano Ferraresi (), Umberto Galmarini (), Leonzio Rizzo () and Alberto Zanardi ()
Additional contact information
Umberto Galmarini: University of Insubria
Leonzio Rizzo: IEB
Alberto Zanardi: Italian Parliamentary Budget Office

International Tax and Public Finance, 2019, vol. 26, issue 4, 872-898

Abstract: 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.

Keywords: Political budget cycle; Local elections; Local property tax; Tax autonomy; Fiscal centralization (search for similar items in EconPapers)
JEL-codes: C23 H71 H72 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Switch towards tax centralization in Italy: A wake up for the local political budget cycle (2016) Downloads
Working Paper: Switch towards tax centralization in Italy: a wake up for the local political budget cycle (2016) Downloads
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