The Effects of Electoral Incentives on Fiscal Policy: Evidence from a Legislative Change at the Local Government Level
Veiga, Linda and Veiga, Francisco José, (2019). The Effects of Electoral Incentives on Fiscal Policy: Evidence from a Legislative Change at the Local Government Level. The Journal of Law, Economics, and Organization, 35(2), 394-421
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Sub-type Journal article Author Veiga, Linda
Veiga, Francisco JoséTitle The Effects of Electoral Incentives on Fiscal Policy: Evidence from a Legislative Change at the Local Government Level Appearing in The Journal of Law, Economics, and Organization Volume 35 Issue No. 2 Publication Date 2019-07 Place of Publication Oxford Publisher Oxford University Press Start page 394 End page 421 Language eng Abstract This paper analyzes how electoral incentives shape fiscal policy, focusing on the introduction of mayoral term limits in Portugal. Applying a difference-in-differences approach, we find evidence that when a municipality has a term-limited (TL) mayor, it experiences a fall in revenues and expenditures. The effect seems to be driven by lower effort of lame-duck mayors, relative to reelection-eligible ones, to implement new investments and to obtain conditional grants from the central government, especially in election years. Although lame ducks are less opportunistic in general, the results suggest that opportunism may not decrease in municipalities whose TL mayors resign before the end of their terms and are replaced by their (eligible) vice-mayors. JEL D72, H3, H7, K16 Copyright Holder The Authors Copyright Year 2019 Copyright type All rights reserved DOI 10.1093/jleo/ewy027 -
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