Working Paper, Department of Economics, Uppsala University 2016:6
I exploit a reform that required Italian municipalities to disclose their balance sheetsbefore elections to study whether having more informed voters aects the political budgetcycle. To start, investment spending in the year before elections is 28.5% higher thanin the election year and this increase is mainly financed with new debt and sales of publicassets. Taking advantage of the staggered timing of municipal elections, I estimate thatthe reform reduced this pre-electoral spending increase by around one-third. I also study the role of local newspapers in disseminating municipal financial information to votersand I find that the reduction in spending after the reform is twice as strong in provinceswith above-median local newspapers sales per capita. I interpret these results as evidencethat mayors react to more informed voters by reducing spending manipulation.
Information Political budget cycles accountability Italian municipalities