Revised and Resubmitted to the National Tax Journal
Finalist at ITAX PhD Student Award 2018
This paper compares policy outcomes under the runoff system and the plurality rule by exploiting the assignment of municipalities in Italy to different voting systems based on a population threshold. Regression-discontinuity estimates show that municipalities under the runoff system spend 10 percent more than those under the plurality rule and that additional expenditures are not financed via higher taxation. Municipalities exposed to the runoff system are more likely to attract external resources from the region, the national government, and the European Union, and to co-finance development projects. The empirical findings presented in the paper suggest that the effect of the runoff voting system on fiscal policy depends on the need to seek larger support among voters.