Lame Ducks and Local Fiscal Policy: Quasi-Experimental Evidence from Portugal

Mariana Lopes da Fonseca

The Economic Journal, 2020, vol. 130, issue 626, 511-533

Abstract: I use the introduction of mayoral term limits in Portugal to identify how an exogenous variation in eligibility for office affects policy decisions. Relying on a quasi-experimental difference-in-differences approach, I find that term-limited incumbents pursue more conservative fiscal policies than those who are eligible for re-election. Heterogeneous effects show that the treatment effects primarily reflect the behaviour of right-leaning, term-limited incumbents. Results are in line with a model in which right-leaning officeholders try to maintain a good reputation by pleasing an electorate prone to redistribution while they are eligible, but adopt policies closer to their true preferences when term limited.

Date: 2020
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