Political budget cycles evidence from Italian cities Alberto Alesina, Matteo Paradisi
By: Alesina, Alberto
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Material type: 
ArticlePublisher: 2017Subject(s): PRESUPUESTOS LOCALES | TRIBUTOS LOCALES | IMPUESTOS LOCALES | PRESION FISCAL | ELECCIONES | POLITICA FISCAL | ITALIA
In:
Economics & Politics ; v. 29, n. 2, July 2017, p. 157-177Summary: The introduction of a new real estate taxes in Italy in 2011 provides a natural experiment, which is useful to test for political budget cycles. The new real estate tax allowed discretion to local governments. This generatesa random variation in the distance of municipalities from the following elections when they choose the level of the tax rate. We do find substantial evidence ofpolitical budget cycles, with municipalities choosinglower tax rates when close to elections. We observe this budget cycle 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 andso didmunicipalities with a lower average value of properties.Finally, the political budget cycle is stronger in theSouth.
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Disponible también en línea a través de la Biblioteca del Instituto de Estudios Fiscales. Bibliografía. Resumen.
The introduction of a new real estate taxes in Italy in 2011 provides a natural experiment, which is useful to test for political budget cycles. The new real estate tax allowed discretion to local governments. This generatesa random variation in the distance of municipalities from the following elections when they choose the level of the tax rate. We do find substantial evidence ofpolitical budget cycles, with municipalities choosinglower tax rates when close to elections. We observe this budget cycle 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 andso didmunicipalities with a lower average value of properties.Finally, the political budget cycle is stronger in theSouth.
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