Manipulating municipal budgets: unveiling opportunistic behavior of Italian mayors

Emanuele Bracco, Marco Alberto De Benedetto () and Maurizio Lisciandra ()
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Marco Alberto De Benedetto: University of Calabria

Public Choice, 2024, vol. 198, issue 3, No 4, 317-342

Abstract: Abstract We examine the political budget cycle hypothesis using revenue data from Italian municipal administrations. By leveraging on the staggered schedule of local elections and employing a difference-in-differences strategy, we find evidence of opportunistic behavior by mayors. In pre-election years, mayors reduce total accrued revenues from municipal solid waste fees and property taxes, which are the primary sources of revenue in municipal financial statements. Non-term-limited mayors who seek re-election engage in such opportunistic behavior, while those facing a binding term limit do not manipulate revenues for electoral purposes. Our findings remain robust across various specifications and controls. Heterogeneity analysis suggests that the observed results are primarily driven by smaller municipalities, as well as by those situated in the South of Italy that exhibit low levels of social capital. Mayors employing political budget cycles also strategically offset reductions in highly salient fees and taxes by raising less salient non-tax revenues. This study contributes to the understanding of political budget cycles in the context of Italian municipal administrations and has implications for the broader literature on electoral behavior and public finance.

Keywords: Local political budget cycle; Real estate tax; Waste disposal tariffs; Clientelism; Fiscal manipulation; Electoral incentives (search for similar items in EconPapers)
JEL-codes: C23 D72 H20 H71 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11127-023-01131-3

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