Manager or Professional Politician? Local Fiscal Autonomy and the Skills of Elected Officials

57 Pages Posted: 13 Sep 2017 Last revised: 9 Feb 2020

See all articles by Massimo Bordignon

Massimo Bordignon

Universita Cattolica; CESifo (Center for Economic Studies and Ifo Institute)

Matteo Gamalerio

University of Barcelona - Institut d'Economia de Barcelona (IEB)

Gilberto Turati

Catholic University of the Sacred Heart, Rome

Date Written: February 7, 2020

Abstract

We provide a theoretical and empirical assessment of why local fiscal autonomy can affect the skills of elected officials in sub-national governments. We first develop a model of politics with different types of politicians and show that -- following a tax decentralization reform increasing local fiscal autonomy -- politicians with high administrative skills are elected in rich jurisdictions while politicians with high political skills are elected in poor ones. As a result, voter welfare increases only, or mainly, in rich jurisdictions. We then look for empirical support to these predictions by exploiting the decentralization reforms affecting Italian municipalities in the '90s. These reforms introduced both the direct election of the mayor and new autonomous tax tools for municipalities characterized by large differences in their tax bases. Our estimates -- robust to several alternative stories -- emphasize a differential change in elected officials at the municipal level between rich and poor jurisdictions. These findings provide a new explanation for the observed poor performance of local governments largely financed by grants.

Keywords: decentralization, skills of politicians, fiscal autonomy

JEL Classification: D72, D78

Suggested Citation

Bordignon, Massimo and Gamalerio, Matteo and Turati, Gilberto, Manager or Professional Politician? Local Fiscal Autonomy and the Skills of Elected Officials (February 7, 2020). Available at SSRN: https://ssrn.com/abstract=3035439 or http://dx.doi.org/10.2139/ssrn.3035439

Massimo Bordignon

Universita Cattolica ( email )

20123 Milano
Italy
+39-2-5836-3300/1 (Phone)
+39-2-5836-3302 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Matteo Gamalerio (Contact Author)

University of Barcelona - Institut d'Economia de Barcelona (IEB) ( email )

c/ Tinent Coronel Valenzuela, 1-11
Barcelona, 08034
Spain

Gilberto Turati

Catholic University of the Sacred Heart, Rome ( email )

Largo F. Vito, 1
Rome, 00168
Italy

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