IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_11930.html
   My bibliography  Save this paper

Strategic Bankruptcies. Do Smart Politicians Do It Better?

Author

Listed:
  • Massimo Bordignon
  • Davide Cipullo
  • Gilberto Turati

Abstract

We study the reaction of low vs. high-skilled politicians to a reform, approved in Italy in 2011, that introduces stringent individual financial and career sanctions to local administrators who are judged responsible for their municipality’s bankruptcy. To this aim, we leverage exogenous variation induced by close elections between a mayoral candidate who holds a college degree and a mayoral candidate who does not. After the introduction of sanctions, skilled politicians tend to declare bankruptcy with a higher probability than low-skilled politicians. The effect is concentrated in municipalities in which the financial state of distress was not advocating for a bankruptcy. Our findings document that individual sanctions against politicians may backfire if strategic considerations are not taken into account properly.

Suggested Citation

  • Massimo Bordignon & Davide Cipullo & Gilberto Turati, 2025. "Strategic Bankruptcies. Do Smart Politicians Do It Better?," CESifo Working Paper Series 11930, CESifo.
    • Handle: RePEc:ces:ceswps:_11930
    as

    Download full text from publisher

    File URL: https://www.ifo.de/DocDL/cesifo1_wp11930.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    soft budget constraint; bankruptcy; municipalities; intergovernmental relations; mayors; political selection;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing

    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:ces:ceswps:_11930. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.