Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322492 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11930
Publisher: 
CESifo GmbH, Munich
Abstract: 
We study the reaction of low vs. high-skilled politicians to a reform, approved in Italy in 2011, that introduces stringent individual financial and career sanctions to local administrators who are judged responsible for their municipality's bankruptcy. To this aim, we leverage exogenous variation induced by close elections between a mayoral candidate who holds a college degree and a mayoral candidate who does not. After the introduction of sanctions, skilled politicians tend to declare bankruptcy with a higher probability than low-skilled politicians. The effect is concentrated in municipalities in which the financial state of distress was not advocating for a bankruptcy. Our findings document that individual sanctions against politicians may backfire if strategic considerations are not taken into account properly.
Subjects: 
soft budget constraint
bankruptcy
municipalities
intergovernmental relations
mayors
political selection
JEL: 
H63
H72
H74
Document Type: 
Working Paper
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