Abstract
We use data for all Italian municipalities from 2001 to 2007 to empirically test the extent to which two different electoral rules, which hold for small and large municipalities, affect fiscal policy decisions at local level. Municipalities with fewer than 15,000 inhabitants elect their mayors in accordance with a single-ballot plurality rule where only one list can support her/him, while the rest of the municipalities uses a runoff plurality rule where multiple lists can support her/him. Per capita total taxes, charges and current expenditure in large municipalities are lower than in small ones if the mayor of the large municipality does not need a broad coalition to be elected, otherwise the use of a single- or double-ballot rule does not make any difference in the policy outcome.
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Notes
We did not collect data available from 2008 to 2011, because in this period the local fiscal system has been deeply reformed more than one time. In 2008, the property tax (ICI) levied on principal dwellings was replaced by intergovernmental grants. In 2012, instead, a substantial part of intergovernmental grants to municipalities was replaced by the introduction of a new property tax on principal dwellings (IMU) and a set of local devolved small taxes in 2011. There is in Italy some narrative evidence showing that the change in 2008 determined an increase in local spending (linked to population, given that the vertical transfer are allocated according to population) and that in 2011–2012 a decrease in the local spending. On the contrary in the years 2001–2007, we do not assist to any structural reform of the Italian local fiscal tax system and so the electoral system effect we want to capture is more clear-cut identified.
The council performs this task through the discussion and approval of the executive’s courses of action as set out in the program that the mayor has to submit to the council together with his/her budget proposals. If a vote of approval is not passed, then two different scenarios may ensue; either the government continues with its action without the council exercising its extreme power or else the council does in fact exercise said power by voting a motion of no confidence, which if approved leads to new elections for both the council and the mayor (Scarciglia 1993; Fabbrini 2001).
In the period between the first and second ballots, the lists excluded during the first round can now join those that are backing one of the two candidates in the second round, thus creating a sort of band-wagoning effect.
Polarization is very often indirectly estimated through the number of parties in an electoral system (Powell 1982; Pennings 1998), building on Sartori’s idea that in some systems—most often multiparty systems—centrifugal forces produce a fleeing from the center and a pattern of polarized pluralism (Sartori 1976, pp. 131–145).
During 2001–2007, municipalities in Italy have a strong financial constraint (known as internal stability pact) and so total revenue and expenditure must trend in very similar way, otherwise municipalities can be very penalized with federal transfers in subsequent years.
Over 56,707 (8,101 municipalities for 7 years) potential observations, our dataset includes 44,466 observations. As a matter of fact, we exclude 9,786 (1,398 municipalities for 7 years) observations referred to municipalities in Special Statute Regions and Provinces, 2,455 observations relative to municipalities/years where data are not complete or incorrect or to municipalities put under commissioner.
The control function takes the following form:
$$\begin{aligned} f({pop_{i,t}})&= \alpha _1 pop_{i,t} +\alpha _2 pop_{i,t}^2 +\cdots +\alpha _n pop_{i,t}^n +\beta _1 large_{i,t} *pop_{i,t} \\&\quad {}+\beta _2 large_{i,t} *pop_{i,t}^2 +\cdots +\beta _n large_{i,t} *pop_{i,t}^n \end{aligned}$$where n is the chosen polynomial order.
The normalization ensures that the treatment effect at the cutoff point is the coefficient on the treatment variable in a regression model with interaction terms.
275 observations are not included for the same reasons illustrated in footnote 6.
Full details on the municipality distribution across the small and large dimension, along all the years included in our dataset, are provided in Table A1 of the online appendix.
For both cases, the major resigned before the term and the elections were held at the same year. Additionally, it might be the case that among those municipalities which held two or three elections the mayors resigned before the term and so municipalities held again elections before the regular time (five years). However, there are no cases where the mayor was brought down through a vote of no confidence during her legislature.
Details of the switches are in Table A2 of the online appendix.
There is only one municipality (Brusciano) that actually switches from one regime to the other that is not considered in our datastet because it was put under commissioner in the considered period.
Further statistical details are in the online appendix (Table A3).
Even if there is formally a unique list supporting the mayor, common pool problems show up because different parties often ally to form the very frequent single Council list (Lista Civica).
Results are in Table A4 of the online appendix.
Results are displayed in Table A5 of the online appendix.
See Tables A6–A7 of the online appendix.
This is implemented using the Stata command rd developed by by Nichols (2011).
See Table A8 and or Figures A1 and A2 of the online appendix.
See Table A9 of the online appendix.
See Table A10 of the online appendix.
The graphical analyses with 25, 100, 200 bins are available upon request.
Each bins on the left of the cutoff contains on average 48 observations, while each bins on the right of the cutoff includes, on average, 22 observations.
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Acknowledgments
We would like to thank the following for their useful comments and suggestions: Massimo Bordignon, Torun Dewan, Margherita Fort, Stefano Gagliarducci, Mario Jametti, Valentino Larcinese, Heléne Lundqvist, Jordi Jofre Monseny, Federico Revelli, Jim Snyder, Piero Tommasino, two anonymous referees, the editor Ronald Davies, and the participants in seminars held in Uppsala (IIPF 2010), Pavia (SIEP 2010), at the “Institution, Individual Behavior and Economic Outcomes” workshop (University of Sassari, 2011) and at the “Pigou or Hobbes? Budgetary choices of local governments in Italy” workshop (Bank of Italy, Rome 2011). Massimiliano Ferraresi acknowledges funding from the University of Ferrara; Leonzio Rizzo acknowledges funding from the University of Ferrara and the Spanish Ministry of Economy and Competitiveness (ECO2012-37873); Alberto Zanardi acknowledges funding from the University of Bologna.
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Ferraresi, M., Rizzo, L. & Zanardi, A. Policy outcomes of single and double-ballot elections. Int Tax Public Finance 22, 977–998 (2015). https://doi.org/10.1007/s10797-014-9344-x
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DOI: https://doi.org/10.1007/s10797-014-9344-x