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Political Budget Cycles: Evidence from Italian Cities

Author

Listed:
  • Alberto Alesina
  • Matteo Paradisi
Abstract
The introduction of a new real estate taxes in Italy in 2011 generated a natural experiment, which is useful to test political budget cycles, i.e. the strategic choice of fiscal variables in relation to elections. We do find substantial evidence of political budget cycles, with municipalities choosing lower tax rates when close to elections. We observe this budget cycle only for smaller municipalities where the tax was more likely to be the single most important issue for the local government. Cities close to elections with large deficits did not set lower rates before elections, probably because they felt the binding constraints of budget rules.

Suggested Citation

  • Alberto Alesina & Matteo Paradisi, 2014. "Political Budget Cycles: Evidence from Italian Cities," NBER Working Papers 20570, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:20570
    Note: PE POL
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    • H0 - Public Economics - - General

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