IDEAS home Printed from https://ideas.repec.org/a/eee/regeco/v64y2017icp1-11.html
   My bibliography  Save this article

Term limits for mayors and intergovernmental grants: Evidence from Italian cities

Author

Listed:
  • Dalle Nogare, Chiara
  • Kauder, Björn

Abstract

We investigate how term limits for mayors influence central government transfers to municipalities. Estimates are based on a dataset of Italian cities over the 1998–2010 period. To credibly identify the influence of term limits, our estimations include mayor fixed effects. We also consider intra-term differences in intergovernmental grants. We provide evidence that electoral incentives distort rather than discipline incumbent mayors’ behavior because transfers are higher before an election with an eligible incumbent, in line with the political budget cycle literature. This evidence is also consistent with the idea that the allocation of intergovernmental grants is influenced by lobbying on the part of eligible local government officeholders, as in Borck and Owings (2003).

Suggested Citation

  • Dalle Nogare, Chiara & Kauder, Björn, 2017. "Term limits for mayors and intergovernmental grants: Evidence from Italian cities," Regional Science and Urban Economics, Elsevier, vol. 64(C), pages 1-11.
  • Handle: RePEc:eee:regeco:v:64:y:2017:i:c:p:1-11
    DOI: 10.1016/j.regsciurbeco.2017.01.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0166046217300273
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Foremny, Dirk & Freier, Ronny & Moessinger, Marc-Daniel & Yeter, Mustafa, 2014. "Overlapping political budget cycles in the legislative and the executive," ZEW Discussion Papers 14-099, ZEW - Leibniz Centre for European Economic Research.
    2. Bracco, Emanuele & Lockwood, Ben & Porcelli, Francesco & Redoano, Michela, 2015. "Intergovernmental grants as signals and the alignment effect: Theory and evidence," Journal of Public Economics, Elsevier, vol. 123(C), pages 78-91.
    3. Grossman, Philip J, 1994. "A Political Theory of Intergovernmental Grants," Public Choice, Springer, vol. 78(3-4), pages 295-303, March.
    4. Timothy Besley & Anne Case, 2003. "Political Institutions and Policy Choices: Evidence from the United States," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 7-73, March.
    5. Brender, Adi & Drazen, Allan, 2005. "Political budget cycles in new versus established democracies," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1271-1295, October.
    6. Niklas Potrafke, 2012. "Political cycles and economic performance in OECD countries: empirical evidence from 1951–2006," Public Choice, Springer, vol. 150(1), pages 155-179, January.
    7. Massimiliano Ferraresi & Leonzio Rizzo & Alberto Zanardi, 2015. "Policy outcomes of single and double-ballot elections," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(6), pages 977-998, December.
    8. Toke S. Aidt & Julia Shvets, 2012. "Distributive Politics and Electoral Incentives: Evidence from Seven US State Legislatures," American Economic Journal: Economic Policy, American Economic Association, vol. 4(3), pages 1-29, August.
    9. Mark Mink & Jakob de Haan & Jakob de Haan, 2005. "Has the Stability and Growth Pact Impeded Political Budget Cycles in the European Union?," CESifo Working Paper Series 1532, CESifo.
    10. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    11. Alain de Janvry & Frederico Finan & Elisabeth Sadoulet, 2012. "Local Electoral Incentives and Decentralized Program Performance," The Review of Economics and Statistics, MIT Press, vol. 94(3), pages 672-685, August.
    12. Mario Mechtel & Niklas Potrafke, 2013. "Electoral cycles in active labor market policies," Public Choice, Springer, vol. 156(1), pages 181-194, July.
    13. Elena Gennari & Giovanna Messina, 2014. "How sticky are local expenditures in Italy? Assessing the relevance of the flypaper effect through municipal data," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(2), pages 324-344, April.
    14. Vadlamannati, Krishna Chaitanya, 2015. "Fighting corruption or elections? The politics of anti-corruption policies in India: A subnational study," Journal of Comparative Economics, Elsevier, vol. 43(4), pages 1035-1052.
    15. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2004. "Opportunistic Political Cycles: Test in a Young Democracy Setting," The Quarterly Journal of Economics, Oxford University Press, vol. 119(4), pages 1301-1338.
    16. Ashworth, John & Geys, Benny & Heyndels, Bruno, 2006. "Determinants of tax innovation: The case of environmental taxes in Flemish municipalities," European Journal of Political Economy, Elsevier, vol. 22(1), pages 223-247, March.
    17. Lars Feld & Christoph Schaltegger, 2005. "Voters AS A Hard Budget Constraint: On the Determination of Intergovernmental Grants," Public Choice, Springer, vol. 123(1), pages 147-169, April.
    18. Timothy Besley & Anne Case, 1995. "Does Electoral Accountability Affect Economic Policy Choices? Evidence from Gubernatorial Term Limits," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 769-798.
    19. Marika Cioffi & Giovanna Messina & Pietro Tommasino, 2012. "Parties, institutions and political budget cycles at the municipal level," Temi di discussione (Economic working papers) 885, Bank of Italy, Economic Research and International Relations Area.
    20. Reischmann, Markus, 2016. "Creative accounting and electoral motives: Evidence from OECD countries," Journal of Comparative Economics, Elsevier, vol. 44(2), pages 243-257.
    21. Shi, Min & Svensson, Jakob, 2006. "Political budget cycles: Do they differ across countries and why?," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1367-1389, September.
    22. John A. List & Daniel M. Sturm, 2006. "How Elections Matter: Theory and Evidence from Environmental Policy," The Quarterly Journal of Economics, Oxford University Press, vol. 121(4), pages 1249-1281.
    23. Smart, Michael & Sturm, Daniel M., 2013. "Term limits and electoral accountability," Journal of Public Economics, Elsevier, vol. 107(C), pages 93-102.
    24. Lorenzo Boetti & Massimiliano Piacenza & Gilberto Turati, 2012. "Decentralization and Local Governments' Performance: How Does Fiscal Autonomy Affect Spending Efficiency?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 68(3), pages 269-302, September.
    25. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
    26. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    27. Pereira, Paulo T C, 1996. "A Politico-economic Approach to Intergovernmental Lump-Sum Grants," Public Choice, Springer, vol. 88(1-2), pages 185-201, July.
    28. Kenneth Rogoff & Anne Sibert, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Oxford University Press, vol. 55(1), pages 1-16.
    29. Linda Veiga & Francisco Veiga, 2007. "Political business cycles at the municipal level," Public Choice, Springer, vol. 131(1), pages 45-64, April.
    30. Toke Aidt & Francisco Veiga & Linda Veiga, 2011. "Election results and opportunistic policies: A new test of the rational political business cycle model," Public Choice, Springer, vol. 148(1), pages 21-44, July.
    31. Benny Geys, 2013. "Election Cycles in MPs' Outside Interests? The UK House of Commons, 2005–2010," Political Studies, Political Studies Association, vol. 61(2), pages 462-472, June.
    32. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
    33. Dick, Andrew R. & Lott, John Jr., 1993. "Reconciling voters' behavior with legislative term limits," Journal of Public Economics, Elsevier, vol. 50(1), pages 1-14, January.
    34. Veronica Grembi & Tommaso Nannicini & Ugo Troiano, 2016. "Do Fiscal Rules Matter?," American Economic Journal: Applied Economics, American Economic Association, vol. 8(3), pages 1-30, July.
    35. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, February.
    36. Torsten Persson & Guido Tabellini, 2003. "Do Electoral Cycles Differ Across Political Systems?," Working Papers 232, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    37. DeBacker, Jason, 2011. "The price of pork: The seniority trap in the U.S. House," Journal of Public Economics, Elsevier, vol. 95(1), pages 63-78.
    38. Antonio Merlo & Vincenzo Galasso & Massimiliano Landi & Andrea Mattozzi, 2008. "The Labor Market of Italian Politicians," Working Papers 15-2008, Singapore Management University, School of Economics, revised Oct 2008.
    39. Carozzi, Felipe & Repetto, Luca, 2016. "Sending the pork home: Birth town bias in transfers to Italian municipalities," Journal of Public Economics, Elsevier, vol. 134(C), pages 42-52.
    40. Stefano Gagliarducci & Tommaso Nannicini, 2013. "Do Better Paid Politicians Perform Better? Disentangling Incentives From Selection," Journal of the European Economic Association, European Economic Association, vol. 11(2), pages 369-398, April.
    41. Joseph M. Johnson & W. Mark Crain, 2004. "Effects of Term Limits on Fiscal Performance: Evidence from Democratic Nations," Public Choice, Springer, vol. 119(1_2), pages 73-90, April.
    42. Robert Barro, 1973. "The control of politicians: An economic model," Public Choice, Springer, vol. 14(1), pages 19-42, March.
    43. Borck, Rainald & Owings, Stephanie, 2003. "The political economy of intergovernmental grants," Regional Science and Urban Economics, Elsevier, vol. 33(2), pages 139-156, March.
    44. Klein, Fabio Alvim & Sakurai, Sergio Naruhiko, 2015. "Term limits and political budget cycles at the local level: evidence from a young democracy," European Journal of Political Economy, Elsevier, vol. 37(C), pages 21-36.
    45. Foremny, Dirk & Riedel, Nadine, 2014. "Business taxes and the electoral cycle," Journal of Public Economics, Elsevier, vol. 115(C), pages 48-61.
    46. Aidt, Toke S. & Mooney, Graham, 2014. "Voting suffrage and the political budget cycle: Evidence from the London Metropolitan Boroughs 1902–1937," Journal of Public Economics, Elsevier, vol. 112(C), pages 53-71.
    47. Chiara Dalle Nogare & Matteo Galizzi, 2011. "The political economy of cultural spending: evidence from Italian cities," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 35(3), pages 203-231, August.
    48. Sjahrir, Bambang Suharnoko & Kis-Katos, Krisztina & Schulze, Günther G., 2013. "Political budget cycles in Indonesia at the district level," Economics Letters, Elsevier, vol. 120(2), pages 342-345.
    49. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    50. David Bartolini & Raffaella Santolini, 2009. "Fiscal Rules and the Opportunistic Behaviour of the Incumbent Politician: Evidence from Italian Municipalities," CESifo Working Paper Series 2605, CESifo.
    51. 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.
    52. Dalle Nogare, Chiara & Ricciuti, Roberto, 2011. "Do term limits affect fiscal policy choices?," European Journal of Political Economy, Elsevier, vol. 27(4), pages 681-692.
    53. Dur, Robert & Staal, Klaas, 2008. "Local public good provision, municipal consolidation, and national transfers," Regional Science and Urban Economics, Elsevier, vol. 38(2), pages 160-173, March.
    54. William D. Nordhaus, 1975. "The Political Business Cycle," Review of Economic Studies, Oxford University Press, vol. 42(2), pages 169-190.
    55. Buettner, Thiess & Holm-Hadulla, Fédéric, 2013. "City size and the demand for local public goods," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 16-21.
    56. Bernhardt, Dan & Dubey, Sangita & Hughson, Eric, 2004. "Term limits and pork barrel politics," Journal of Public Economics, Elsevier, vol. 88(12), pages 2383-2422, December.
    57. Weingast, Barry R & Shepsle, Kenneth A & Johnsen, Christopher, 1981. "The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 642-664, August.
    58. Galli, Emma & Rossi, Stefania P S, 2002. "Political Budget Cycles: The Case of the Western German Lander," Public Choice, Springer, vol. 110(3-4), pages 283-303, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bordignon, Massimo & Gamalerio, Matteo & Turati, Gilberto, 2020. "Manager or professional politician? Local fiscal autonomy and the skills of elected officials," Regional Science and Urban Economics, Elsevier, vol. 83(C).
    2. Björn Kauder & Manuela Krause & Niklas Potrafke, 2018. "Electoral cycles in MPs’ salaries: evidence from the German states," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 25(4), pages 981-1000, August.
    3. Ilya A. Vaskin, 2020. "Buying Loyalty Of Voters Or Local Elites? Political Alignment And Transfers To Provinces In Tutelary Regimes: The Case Of Iran," HSE Working papers WP BRP 73/PS/2020, National Research University Higher School of Economics.
    4. Manuela Krause, 2019. "Communal fees and election cycles: Evidence from German municipalities," ifo Working Paper Series 293, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    5. Steven Gordon, 2019. "The Returns to Lobbying: Evidence from Local Governments in the “Age of Earmarksâ€," Public Finance Review, , vol. 47(5), pages 893-924, September.
    6. Kauder, Björn & Potrafke, Niklas & Reischmann, Markus, 2016. "Do politicians reward core supporters? Evidence from a discretionary grant program," European Journal of Political Economy, Elsevier, vol. 45(C), pages 39-56.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Manuela Krause, 2019. "Communal fees and election cycles: Evidence from German municipalities," ifo Working Paper Series 293, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    2. Markus Reischmann, 2016. "Empirische Studien zu Staatsverschuldung und fiskalischen Transferzahlungen," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 63.
    3. Baskaran, Thushyanthan & Brender, Adi & Blesse, Sebastian & Reingewertz, Yaniv, 2016. "Revenue decentralization, central oversight and the political budget cycle: Evidence from Israel," European Journal of Political Economy, Elsevier, vol. 42(C), pages 1-16.
    4. Dirk Foremny & Ronny Freier & Marc-Daniel Moessinger & Mustafa Yeter, 2018. "Overlapping political budget cycles," Public Choice, Springer, vol. 177(1), pages 1-27, October.
    5. Bernardo P. Schettini & Rafael Terra, 2020. "Electoral incentives and Public Employees’ Retirement Systems in Brazilian municipalities," Public Choice, Springer, vol. 184(1), pages 79-103, July.
    6. Israel Garcia & Bernd Hayo, 2020. "Political Budget Cycles Revisited: Testing the Signalling Process," MAGKS Papers on Economics 202014, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    7. Foremny, Dirk & Riedel, Nadine, 2014. "Business taxes and the electoral cycle," Journal of Public Economics, Elsevier, vol. 115(C), pages 48-61.
    8. Raveh, Ohad & Tsur, Yacov, 2020. "Resource windfalls and public debt: A political economy perspective," European Economic Review, Elsevier, vol. 123(C).
    9. Eric Dubois, 2016. "Political business cycles 40 years after Nordhaus," Public Choice, Springer, vol. 166(1), pages 235-259, January.
    10. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Post-Print hal-01291401, HAL.
    11. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291401, HAL.
    12. Klein, Fabio Alvim & Sakurai, Sergio Naruhiko, 2015. "Term limits and political budget cycles at the local level: evidence from a young democracy," European Journal of Political Economy, Elsevier, vol. 37(C), pages 21-36.
    13. Aidt, Toke S. & Mooney, Graham, 2014. "Voting suffrage and the political budget cycle: Evidence from the London Metropolitan Boroughs 1902–1937," Journal of Public Economics, Elsevier, vol. 112(C), pages 53-71.
    14. Ohad Raveh & Yacov Tsur, 2018. "Resource Windfalls and Public Debt: The Role of Political Myopia," OxCarre Working Papers 205, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    15. Chortareas, Georgios & Logothetis, Vasileios & Papandreou, Andreas A., 2016. "Political budget cycles and reelection prospects in Greece's municipalities," European Journal of Political Economy, Elsevier, vol. 43(C), pages 1-13.
    16. Ohad Raveh & Yacov Tsur, 2017. "Political Myopia, Public Debt," OxCarre Working Papers 200, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    17. Cahan, Dodge, 2019. "Electoral cycles in government employment: Evidence from US gubernatorial elections," European Economic Review, Elsevier, vol. 111(C), pages 122-138.
    18. Foremny, Dirk & Freier, Ronny & Moessinger, Marc-Daniel & Yeter, Mustafa, 2014. "Overlapping political budget cycles in the legislative and the executive," ZEW Discussion Papers 14-099, ZEW - Leibniz Centre for European Economic Research.
    19. Toke Aidt & Graham Mooney, 2014. "Voter suffrage and the political budget cycle: evidence from the London Metropolitan Boroughs 1902-1937," Cambridge Working Papers in Economics 1401, Faculty of Economics, University of Cambridge.
    20. Linda Gonçalves Veiga & Francisco veiga, 2016. "Term limits at the local government level," NIPE Working Papers 7/2016, NIPE - Universidade do Minho.

    More about this item

    Keywords

    Term limits; intergovernmental grants; local government; fiscal policy; electoral cycles;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:regeco:v:64:y:2017:i:c:p:1-11. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nithya Sathishkumar). General contact details of provider: http://www.elsevier.com/locate/regec .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.