Revise and Resubmit at the National Tax Journal
Finalist at ITAX PhD Student Award 2018
Voting systems shape the electoral incentives faced by politicians, and in turn may affect the fiscal policy implemented by the winner. 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. This evidence is rationalized using a simple theoretical framework in which office-motivated politicians under the runoff are induced to exert more effort in the provision of public good.