Candid Lame Ducks

44 Pages Posted: 23 Mar 2016

Date Written: February 29, 2016

Abstract

This study relies on a recent reform introducing gubernatorial term limits at the Portuguese local level to explore how an exogenous variation in eligibility for re-election affects local fiscal policy choices. Relying on electoral and fiscal outcomes for the past three complete electoral terms and a quasi-experimental diff-in-diff approach, the empirical analysis estimates how fiscal policy differs on average between re-eligible and term-limited incumbents. Results indicate that rather than engaging in opportunistic behavior, lame ducks pursue more conservative fiscal policies. Term limited officeholders choose lower property tax rates and reduced levels of current expenditure relative to re-eligible incumbents. Heterogeneous effects further suggest that ineligible mayors behave more truthfully and do not engage in political business cycles, challenging previous results in the literature.

Keywords: institutional reform, term limits, fiscal policy, municipal accounts

JEL Classification: D720, H110

Suggested Citation

Lopes da Fonseca, Mariana, Candid Lame Ducks (February 29, 2016). CESifo Working Paper Series No. 5773, Available at SSRN: https://ssrn.com/abstract=2752864

Mariana Lopes da Fonseca (Contact Author)

University of St. Gallen ( email )

Bodanstrasse 8
SIAW-HSG
St.Gallen, 9000
Switzerland

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