Who do you blame in local finance? An analysis of municipal financing in Italy

Arbeitspapier

In a political agency model, we study the effect of introducing a less transparent tax tool for the financing of local governments. We show that lower quality politicians would use more the less transparent tax tool to enhance their probability of re-election. This prediction is tested by studying a reform that in 1999 allowed Italian municipalities to partially substitute a more accountable source of tax revenue (the property tax) with a less transparent one (a surcharge on the personal income tax of residents). Using a Difference in Difference approach, we show that in line with theory, Mayors at their first term in power adopted a higher surcharge on the personal income tax and reduced the property tax rate significantly more than Mayors in their final term..

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 35

Classification and Topics

• Classification: Wirtschaft ; State and Local Taxation, Subsidies, and Revenue ; Intergovernmental Relations; Federalism; Secession ; Positive Analysis of Policy Formulation and Implementation
• Subject: Fiscal federalism ; Tax transparency ; Agency Model ; Property tax

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bordignon, Massimo ; Grembi, Veronica ; Piazza, Santino
• Event: Veröffentlichung
• (who): Università Cattolica del Sacro Cuore, Dipartimento di Economia e Finanza (DISCE)
• (where): Milano
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/170632
• Last update: 10.03.2025, 11:44 AM CET