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The Sacred and the Profane of Budget Cycles: Evidence from Italian Municipalities

Federico Revelli () and Roberto Zotti ()
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Roberto Zotti: University of Turin, http://www.est.unito.it/

Department of Economics and Statistics Cognetti de Martiis. Working Papers from University of Turin

Abstract: This paper investigates the influence of the staggered schedule of Italian mayoral elections and of the calendar of traditional religious celebrations (Patron Saint days) on the timing of local tax setting decisions and on the selection process of mayoral candidates. As for the impact of the electoral schedule on fiscal policy-making, we find evidence of a political budget cycle on yearly panel data from over 8,000 municipal authorities, with budgets deteriorating as elections approach and improving thereafter. When analyzing the specific timing of annual local tax rate decisions within election years, and using localities not holding elections in those same years as controls, we find that incumbents are more likely to schedule the crucial decisions about the local income tax rate during the months following the date of the elections. As for the effect of Patron Saint day celebrations, we find that fiscal decisions are less likely to be scheduled around those dates, compatibly with the hypothesis that those events constitute temporary shocks to the social capital of local communities, inducing incumbent governments to abstain from making potentially disruptive fiscal decisions under those sensitive circumstances. Finally, we find that when local elections happen to take place in the proximity of a locality’s traditional celebrations, the elected mayors tend to exhibit milder ideology and higher indicators of valence, reinforcing the hypothesis that local folklore contributes to common value thinking, social capital building, and sense of community.

New Economics Papers: this item is included in nep-cdm, nep-soc and nep-ure
Date: 2018-10
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Persistent link: https://EconPapers.repec.org/RePEc:uto:dipeco:201816

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