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Who do you Blame in Local Finance? An Analysis of Municipal Financing in Italy

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  • Massimo Bordignon
  • Santino Piazza

Abstract

A 1999 reform allowed Italian Mayors to partially substitute a more accountable source of tax revenue (the property tax) with a less transparent one (a surcharge on the personal income tax). Theoretical analysis suggests this should give incompetent Mayors a less costly way to hide themselves, so allowing them to be more easily re-elected. An empirical analysis on Piedmont municipalities confirms these hypotheses.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-06/cesifo1_wp3100.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3100.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3100

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Keywords: partial decentralization; fiscal federalism; transparency; political behavior;

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References

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  1. James E. Alt & David Dreyer Lassen, 2003. "Fiscal Transparency and Fiscal Policy Outcomes in OECD Countries," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 03-02, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  2. Revelli Federico, 2008. "Performance Competition in Local Media Markets," Department of Economics and Statistics Cognetti de Martiis. Working Papers, University of Turin 200801, University of Turin.
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  4. Esteller-More, Alex & Sole-Olle, Albert, 2001. "Vertical income tax externalities and fiscal interdependence: evidence from the US," Regional Science and Urban Economics, Elsevier, vol. 31(2-3), pages 247-272, April.
  5. Jan K. Brueckner, 2007. "Partial Fiscal Decentralization," CESifo Working Paper Series 2137, CESifo Group Munich.
  6. Besley, Timothy J. & Rosen, Harvey S., 1998. "Vertical externalities in tax setting: evidence from gasoline and cigarettes," Journal of Public Economics, Elsevier, vol. 70(3), pages 383-398, December.
  7. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  8. Rogoff, Kenneth & Sibert, Anne, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 55(1), pages 1-16, January.
  9. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
  10. Bordignon, Massimo & Minelli, Enrico, 2001. "Rules transparency and political accountability," Journal of Public Economics, Elsevier, vol. 80(1), pages 73-98, April.
  11. Craig Brett & Joris Pinkse, 2000. "The determinants of municipal tax rates in British Columbia," Canadian Journal of Economics, Canadian Economics Association, vol. 33(3), pages 695-714, August.
  12. Marcelin Joanis, 2009. "Intertwined Federalism: Accountability Problems under Partial Decentralization," CIRANO Working Papers 2009s-39, CIRANO.
  13. Inman, Robert P., 1989. "The local decision to tax : Evidence from large U.S. Cities," Regional Science and Urban Economics, Elsevier, vol. 19(3), pages 455-491, August.
  14. Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2003. "In search of yardstick competition: a spatial analysis of Italian municipality property tax setting," Journal of Urban Economics, Elsevier, vol. 54(2), pages 199-217, September.
  15. Sergio Sakurai & Naercio Menezes-Filho, 2008. "Fiscal policy and reelection in Brazilian municipalities," Public Choice, Springer, vol. 137(1), pages 301-314, October.
  16. Thiess Buettner, 2001. "Local Business Taxation and Competition for Capital: The Choice of the Tax Rate," CESifo Working Paper Series 440, CESifo Group Munich.
  17. Besley, Timothy, 2007. "Principled Agents?: The Political Economy of Good Government," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199283910, October.
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Cited by:
  1. Bracco, Emanuele & Porcelli, Francesco & Redoano, Michela, 2013. "Political Competition, Tax Salience and Accountability: Theory and Some Evidence from Italy," CAGE Online Working Paper Series, Competitive Advantage in the Global Economy (CAGE) 126, Competitive Advantage in the Global Economy (CAGE).
  2. Yu-Fu Chen & Michael Funke, 2010. "Global Warming And Extreme Events: Rethinking The Timing And Intensity Of Environmental Policy," Dundee Discussion Papers in Economics 236, Economic Studies, University of Dundee.
  3. Sandro Brusco & Luca Colombo & Umberto Galmarini, 2010. "Local Governments Tax Autonomy, Lobbying, and Welfare," Department of Economics Working Papers, Stony Brook University, Department of Economics 10-01, Stony Brook University, Department of Economics.
  4. Paul Smoke, 2013. "Why Theory and Practice are Different: The Gap Between Principles and Reality in Subnational Revenue Systems," International Center for Public Policy Working Paper Series, at AYSPS, GSU, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University paper1313, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  5. Giuseppe Mastromatteo, 2011. "H.P. Minsky And Policies To Countervail Crises," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0102, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  6. Giuseppe Mastromatteo, 2011. "The Debate on the Crisis: Recent Reappraisals of the Concept of Functional Finance," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0105, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

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