Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2016:6: Political budget cycles with informed voters: evidence from Italy

Luca Repetto ()
Additional contact information
Luca Repetto: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: I exploit a reform that required Italian municipalities to disclose their balance sheets before elections to study whether having more informed voters aects the political budget cycle. To start, investment spending in the year before elections is 28.5% higher than in the election year and this increase is mainly nanced with new debt and sales of public assets. Taking advantage of the staggered timing of municipal elections, I estimate that the reform reduced this pre-electoral spending increase by around one-third. I also study the role of local newspapers in disseminating municipal nancial information to voters and I nd that the reduction in spending after the reform is twice as strong in provinces with above-median local newspapers sales per capita. I interpret these results as evidence that mayors react to more informed voters by reducing spending manipulation.

Keywords: Information; Political budget cycles; accountability; Italian municipalities

JEL-codes: D72; E62; P16

50 pages, May 5, 2016

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