“Runoff Vs. Plurality: Does it Matter for Fiscal Policy? Evidence from Italy”

Finalist at ITAX PhD Student Award 2018

Links: Latest version Uppsala University WP (Oct. 2018)

Abstract:

This paper compares the runoff system and the plurality rule in terms of the implemented fiscal policy. I use the change in the voting rule in Italian municipalities at 15,000 residents to implement a regression discontinuity design. The results show that municipalities under the runoff system spend at least 10 percent more than those under the plurality rule, and that additional expenditures are not nanced via higher taxation. This evidence is rationalized using a simple theoretical framework in which office-motivated politicians under the runoff are induced by electoral incentives to exert more effort in the provision of public good.