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The Effects of Electoral Incentives on Fiscal Policy: Evidence from a Legislative Change at the Local Government Level

Author

Listed:
  • Linda Gonçalves Veiga
  • Francisco José Veiga

Abstract

This paper analyzes how electoral incentives shape fiscal policy, focusing on the introduction of mayoral term limits in Portugal. Applying a difference-in-differences approach, we find evidence that when a municipality has a term-limited (TL) mayor, it experiences a fall in revenues and expenditures. The effect seems to be driven by lower effort of lame-duck mayors, relative to reelection-eligible ones, to implement new investments and to obtain conditional grants from the central government, especially in election years. Although lame ducks are less opportunistic in general, the results suggest that opportunism may not decrease in municipalities whose TL mayors resign before the end of their terms and are replaced by their (eligible) vice-mayors.

Suggested Citation

  • Linda Gonçalves Veiga & Francisco José Veiga, 2019. "The Effects of Electoral Incentives on Fiscal Policy: Evidence from a Legislative Change at the Local Government Level," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 35(2), pages 394-421.
    • Handle: RePEc:oup:jleorg:v:35:y:2019:i:2:p:394-421.
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    File URL: http://hdl.handle.net/10.1093/jleo/ewy027
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    Citations

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    Cited by:

    1. Ricardo Duque Gabriel, 2020. "Who should you vote for? Empirical evidence from Portuguese local governments," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 19(1), pages 5-31, January.
    2. Lewis, Blane D. & Nguyen, Hieu T.M. & Hendrawan, Adrianus, 2020. "Political accountability and public service delivery in decentralized Indonesia: Incumbency advantage and the performance of second term mayors," European Journal of Political Economy, Elsevier, vol. 64(C).
    3. Raveh, Ohad & Tsur, Yacov, 2020. "Reelection, growth and public debt," European Journal of Political Economy, Elsevier, vol. 63(C).
    4. Bernardo P. Schettini & Rafael Terra, 2020. "Electoral incentives and Public Employees’ Retirement Systems in Brazilian municipalities," Public Choice, Springer, vol. 184(1), pages 79-103, July.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • K16 - Law and Economics - - Basic Areas of Law - - - Election Law

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