Tax Limits and Local Democracy
IEB Working Paper N. 2013/029
47 Pages Posted: 16 Oct 2013
Date Written: June 13, 2013
Based on a theoretical model where state limits on local government policy elicit a move from private value (position issue) to common value (valence issue) voting, I exploit exogenous variation in tax limitation rules in over 7,000 Italian municipalities during the 2000s to show that fiscal restraints provoke a fall in voter turnout and number of mayor candidates, and a rise in elected mayors’ valence proxy and win margins. The evidence is compatible with the hypothesis of hierarchical tax limitations fading the ideological stakes of local elections and favoring valence-based party line crossing, thus questioning the influential accountability postulate of the fiscal decentralization lore.
Keywords: Local elections, voter turnout, tax and expenditure limitations, fiscal decentralization
JEL Classification: D72, H77, C23
Suggested Citation: Suggested Citation