Revenue decentralization, central oversight and the political budget cycle: Evidence from Israel

Arbeitspapier

This paper examines whether revenue decentralization and direct external financial supervision affect the incidence and strength of political budget cycles, using a panel of Israeli municipalities during the period 1999-2009. We find that high dependence on central government transfers - as reflected in a low share of locally raised revenues in the municipality´s budget - exacerbates political budget cycles, while tight monitoring - exercised through central government appointment of external accountants to debt accumulating municipalities - eliminates them. These results suggest that political budget cycles can result from fiscal institutions that create soft budget constraints: that is, where incumbents and rational voters can expect that the costs of pre-election expansions will be partly covered later by the central government.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: cege Discussion Papers ; No. 249

Classification and Topics

• Classification: Wirtschaft ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior ; State and Local Budget and Expenditures ; State and Local Borrowing ; Fiscal Policy
• Subject: political budget cycles ; soft budget constraint ; local governments ; decentralization

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Baskaran, Thushyanthan ; Blesse, Sebastian ; Brender, Adi ; Reingewertz, Yaniv
• Event: Veröffentlichung
• (who): University of Göttingen, Center for European, Governance and Economic Development Research (cege)
• (where): Göttingen
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/111002
• Last update: 10.03.2025, 11:43 AM CET