NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Political Budget Cycles: Evidence from Italian Cities

Alberto Alesina, Matteo Paradisi

NBER Working Paper No. 20570
Issued in October 2014, Revised in June 2015
NBER Program(s):   PE   POL

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.

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Document Object Identifier (DOI): 10.3386/w20570

Published: Alberto Alesina & Matteo Paradisi, 2017. "Political budget cycles: Evidence from Italian cities," Economics & Politics, vol 29(2), pages 157-177.

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