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Political Budget Cycle, Tax Collection, and Yardstick Competition

Author

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  • Ferraresi Massimiliano

    (European Commission, Joint Research Centre (JRC), Ispra, Italy)

Abstract

This paper exploits the political cycle of Italian municipalities to test for the presence of strategic interactions in the collection of local taxation. The revenue from the personal income tax surcharge—a tax tool of low salience—is (positively) plagued by political manipulation and is found to be a strategic complement, but only when mayors run for re-election, a finding consistent with the yardstick competition hypothesis. More salient fiscal tools, such as property tax and user fees and charges, are also (negatively) affected by budget cycles, but they do not appear to be spatially correlated.

Suggested Citation

  • Ferraresi Massimiliano, 2021. "Political Budget Cycle, Tax Collection, and Yardstick Competition," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 21(3), pages 1149-1161, July.
    • Handle: RePEc:bpj:bejeap:v:21:y:2021:i:3:p:1149-1161:n:3
    DOI: 10.1515/bejeap-2020-0380
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    References listed on IDEAS

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    More about this item

    Keywords

    spatial interactions; yardstick competition; political budget cycle; local taxation; tax salience;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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