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 José
    Title 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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    Created: Fri, 31 Jan 2020, 23:38:05 JST by Mario Peixoto on behalf of UNU EGOV