Disponible también en formato electrónico.

Resumen.

Bibliografía.

This paper analyzes the consequences of local fiscal autonomy with respect to political
selection. We propose a model of political careers wherein the decisions to become candidates
and to seek reelection are both endogenous. Private-sector aptitude and political ability
are private information; the latter is revealed to the incumbent during her first period
in office. We show that, following an unanticipated reduction in the returns from holding
office, incumbents with high market ability are more likely to refrain from running for
office again than their lower-ability counterparts. We test that prediction using an unexpected
reduction in the upper bound of the municipal property tax rate, announced by Portugal’s
prime minister in July 2008, just 15 months before the local elections. We rely on a
comprehensive data set for all Portuguese mainland municipalities for the 2005 and 2009
elections, including the characteristics of the municipalities and individual mayors. We
employ a difference-in-differences strategy to show that affected mayors—those who were
forced to reduce the property tax rate, and thus faced a sharp tax revenue decline—are less
likely to seek reelection. This effect is driven by high-professional-status incumbents.