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Political Budget Cycles with Informed Voters: Evidence from Italy

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  • Luca Repetto

Abstract

I exploit a reform that required Italian municipalities to disclose their balance sheets before elections to study whether having more informed voters affects the political budget cycle. Municipal investment in the year before elections is 28.5% higher than in electoral years, and the reform reduced this pre‐electoral spending increase by one third. I then study the role of local newspapers in disseminating municipal financial information to voters and find that the effect of the reform is twice as large in areas with relatively many newspaper readers, suggesting that mayors react to more informed voters by reducing spending manipulation.

Suggested Citation

  • Luca Repetto, 2018. "Political Budget Cycles with Informed Voters: Evidence from Italy," Economic Journal, Royal Economic Society, vol. 128(616), pages 3320-3353, December.
    • Handle: RePEc:wly:econjl:v:128:y:2018:i:616:p:3320-3353
    DOI: 10.1111/ecoj.12570
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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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