Switch Towards Tax Centralization in Italy: A Wake Up for the Local Political Budget Cycle

The abolition of the municipal property tax on owner-occupied dwellings accomplished in Italy in 2008 offers a quasi-natural experiment that allows for the identification of the presence of political budget cycles - the incentives for municipalities close to elections to manipulate policy outcome decisions. Our empirical analysis shows that the reform impacted on municipalities that in 2008 were in their pre-electoral year, by expanding the size of their budget in the form of an increase of current expenditure and fees and charges, but this did not occurred in municipalities that experienced their pre-electoral year before 2008.

Keywords: Political budget cycle, transfers, federal budget, property tax, fiscal reform, local elections

JEL Classification: C3, H71, H72

Suggested Citation: Suggested Citation

Ferraresi, Massimiliano and Galmarini, Umberto and Rizzo, Leonzio and Zanardi, Alberto, Switch Towards Tax Centralization in Italy: A Wake Up for the Local Political Budget Cycle (September 20, 2016). IEB Working Paper 2016/21, Available at SSRN: https://ssrn.com/abstract=2841296 or http://dx.doi.org/10.2139/ssrn.2841296