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

IEB Working Paper 2016/21

40 Pages Posted: 20 Sep 2016

See all articles by Massimiliano Ferraresi

Massimiliano Ferraresi

University of Ferrara

Umberto Galmarini

University of Insubria

Leonzio Rizzo

University of Ferrara - Faculty of Economics

Alberto Zanardi

Bocconi University - Department of Economics

Date Written: September 20, 2016

Abstract

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

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

Massimiliano Ferraresi

University of Ferrara ( email )

Via del Gregorio 13
Ferrara, 44100
Italy

Umberto Galmarini

University of Insubria ( email )

Via Ravasi 2
Varese, 21100 21100
Italy

Leonzio Rizzo (Contact Author)

University of Ferrara - Faculty of Economics ( email )

C.so Ercole I° d'Este 37
Ferrara, 44100
Italy

Alberto Zanardi

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy
+39 02 58365337 (Phone)
+39 02 58365318 (Fax)

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