Wednesday 13 January 2016, 1.00PM to 2.00pm
Speaker(s): Marcello Sartarelli (Alicante)
Abstract: In this paper we test whether municipalities aligned with regional governments, that obtain greater discretionary transfers, modify expenditures or taxes strategically in pre-electoral years to maximise re-election probability, as predicted by political budget cycle (PBC) models. We estimate the effect thanks to rich administrative data on local and regional elections and on municipal budgets, measured as a share of total income, and a regression discontinuity design in close electoral races. We find that in aligned municipalities local taxes are lower by 8.4% only in pre-electoral years. Capital transfers and expenditure are, instead, higher by 23.7% and 18.7% respectively, although with no difference in pre-electoral years. This gives an aligned incumbent a higher probability of re-election by about 20%. In addition, we find that municipalities ruled by either of the two main parties behave similarly. Overall, our results show that partisan lignment is an underexplored channel that can induce PBC in taxes in local governments.
Host: Giacomo De Luca
Location: ARRC Auditorium, A/RC014, Alcuin College
Admission: All Welcome