Skip to main content

The sacred and the profane of budget cycles: evidence from Italian municipalities

Abstract

This paper investigates the influence of the staggered schedule of Italian mayoral elections and of the calendar of traditional religious celebrations (Patron Saint Days) on the timing of fiscal decisions and on the selection of candidates. We find that potentially disruptive local income tax increases are more likely to be taken after local elections and Patron Saint Days. Moreover, when the elections take place during the weeks leading to Patron Saint Day’s traditional celebrations, the elected mayors tend to exhibit milder ideology and higher indicators of valence, reinforcing the hypothesis that local folklore contributes to increasing the sense of community and lowering the ideological stakes of local races.

This is a preview of subscription content, access via your institution.

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6
Fig. 7
Fig. 8

Notes

  1. 1.

    Using daily data would imply managing a sparse dataset with over 25 million observations.

  2. 2.

    While complex policy changes having heterogeneous impact on taxpayers do occur in the dataset, the cases of municipalities moving over time to schedules with lower statutory marginal tax rates are extremely rare.

  3. 3.

    Again, for tractability, the time unit of analysis is the week of the year the Patron Saint Day in a given locality happens to fall into.

  4. 4.

    Due to the difficulty in interpreting marginal effects of interactions from nonlinear models, Table 6 reports the estimates of linear models only.

  5. 5.

    Further specifications of Models 2–4 that include an “After Patron Saint Day” dummy and the associated interaction term return no additional statistically significant coefficient estimates. The results are available on request.

  6. 6.

    Religious activities sometimes go along with folkloric representations and art and music performances for weeks and often require a long preparation. Those events can involve carrying a statue of the saint in procession, historical reenactments, dancing, flag waving, singing, and concluding with fireworks display.

  7. 7.

    The few cases in which Patron Saint Day celebrations are held exactly in the day of the election have been included in the after-celebration dummy.

  8. 8.

    Similar results emerge when using alternative time windows.

  9. 9.

    Indeed, while we know the number of candidates and the rate of voter turnout for all elections, we can only observe a number of personal characteristics for those candidates who manage to become mayors. Therefore, we cannot answer the potentially interesting question of how concomitance of elections and traditional celebrations affects the characteristics of the pool of mayoral candidates.

  10. 10.

    “Honesty” is more difficult to proxy because episodes of corruption or other criminal records of candidates are not available.

  11. 11.

    We follow the classification by the Italian National Institute of Statistics (ISTAT) which identifies the level of competence needed to implement strategies at policy and institutional level such as those acquired by those working in the judicial system, universities, management of public and private companies.

  12. 12.

    We also explored the possibility that the concurrence of elections and Saint Day celebrations might affect political competition by broadening the number of candidates. The number of mayoral candidates in the 2007–2015 time span varies from a minimum of 1 to a maximum of 19 candidates. Races with two-digit candidates are very rare and occur only in very large cities. The estimation results do not show any significant effect of concomitance of electoral and religious events on the degree of competition for office, though (results available on request).

  13. 13.

    Clearly, no effect on turnout should be expected if V already exceeds the cost of voting c.

References

  1. Aidt, T. S., & Mooney, G. (2014). Voting suffrage and the political budget cycle: Evidence from the London metropolitan boroughs 1902–1937. Journal of Public Economics, 112, 53–71.

    Article  Google Scholar 

  2. Akhmedov, A., & Zhuravskaya, E. (2004). Opportunistic political cycles: Test in a young democracy setting. Quarterly Journal of Economics, 119, 1301–1338.

    Article  Google Scholar 

  3. Alesina, A., Cohen, G., & Roubini, N. (1997). Political cycles and the macroeconomy. Cambridge, MA: MIT Press.

    Book  Google Scholar 

  4. Alesina, A., & Paradisi, M. (2017). Political budget cycles: Evidence from Italian cities. Economics and Politics, 29, 157–177.

    Article  Google Scholar 

  5. Atkinson, M. D., & Fowler, A. (2014). Social capital and voter turnout: Evidence from Saint’s day fiestas in Mexico. British Journal of Political Science, 44, 41–59.

    Article  Google Scholar 

  6. Boix, C., & Posner, D. N. (1998). Social capital: Explaining its origins and effects on government performance. British Journal of Political Science, 28, 686–693.

    Article  Google Scholar 

  7. Bonfatti, A., & Forni, L. (2017). Fiscal rules to tame the political budget cycle: Evidence from Italian municipalities. IMF working paper 17/6.

  8. Bordignon, M., Gamalerio, M, & Turati, G. (2013). Decentralization, vertical fiscal imbalance, and political selection. CESifo, WP. N. 4459.

  9. Brender, A., & Drazen, A. (2008). How do budget deficits and economic growth affect reelection prospects? Evidence from a large panel of countries. American Economic Review, 98(5), 2203–2220.

    Article  Google Scholar 

  10. Dahlberg, M., & Mork, E. (2011). Is there an election cycle in public employment? Separating time effects from election year effects. CESifo Economic Studies, 57(3), 480–498.

    Article  Google Scholar 

  11. Drazen, A., & Eslava, M. (2010). Electoral manipulation via expenditure composition: Theory and evidence. Journal of Development Economics, 92, 39–52.

    Article  Google Scholar 

  12. Fiorina, M. (1990). Information and rationality in elections. Information and democratic processes. Champaign: University of Illinois Press.

    Google Scholar 

  13. Foremny, D., & Riedel, N. (2014). Business taxes and the electoral cycle. Journal of Public Economics, 115, 48–61.

    Article  Google Scholar 

  14. Foucault, M., Madies, T., & Paty, S. (2008). Public spending interactions and local politics: Empirical evidence from French municipalities. Public Choice, 137, 57–80.

    Article  Google Scholar 

  15. Fowler, J. (2006). Altruism and turnout. Journal of Politics, 68, 674–683.

    Article  Google Scholar 

  16. Galasso, V., & Nannicini, T. (2011). Competing on good politicians. American Political Science Review, 105, 79–99.

    Article  Google Scholar 

  17. Galli, E., & Rossi, S. P. S. (2002). Political budget cycles: The case of the Western German Länder. Public Choice, 110, 283–303.

    Article  Google Scholar 

  18. Gerber, A., Green, D., & Larimer, C. (2008). Social pressure and voter turnout: Evidence from a large-scale field experiment. American Political Science Review, 102, 33–48.

    Article  Google Scholar 

  19. Khemani, S. (2004). Political cycles in a developing economy: Effect of elections in the Indian states. Journal of Development Economics, 73, 125–154.

    Article  Google Scholar 

  20. Klarin, J. (2019). Bring out the steamrollers: It’s election year again! FinanzArchiv (forthcoming). https://doi.org/10.1628/fa-2019-0012.

  21. Knack, S. (2002). Social capital and the quality of government: Evidence from the States. American Journal of Political Science, 46, 772–785.

    Article  Google Scholar 

  22. Kneebone, R., & McKenzie, K. (2001). Electoral and partisan cycles in fiscal policy: An examination of Canadian provinces. International Tax and Public Finance, 8, 753–774.

    Article  Google Scholar 

  23. Lo Prete, A., & Revelli, F. (2017). Costly voting, turnout, and candidate valence. Economics Letters, 158, 10–13.

    Article  Google Scholar 

  24. Nickerson, D. (2008). Is voting contagious? Evidence from two field experiments. American Political Science Review, 102, 49–57.

    Article  Google Scholar 

  25. Persson, T., & Tabellini, G. (2002). Political economics: Explaining economic policy. Cambridge, MA: MIT Press.

    Google Scholar 

  26. Putnam, R., & Feldstein, L. (2003). Better together: Restoring the American community. New York: Simon & Schuster.

    Google Scholar 

  27. Putnam, R., Leonardi, R., & Nanetti, R. (1993). Making democracy work: Civic traditions in modern Italy. Princeton, NJ: Princeton University Press.

    Google Scholar 

  28. Repetto, L. (2018). Political budget cycles with informed voters: Evidence from Italy. Economic Journal, 128, 3320–3353.

    Article  Google Scholar 

  29. Revelli, F. (2016). Tax limits and local elections. Public Choice, 166, 53–68.

    Article  Google Scholar 

  30. Revelli, F. (2019). The electoral migration cycle. European Journal of Political Economy, 59, 461–482.

    Article  Google Scholar 

  31. Riker, W., & Ordeshook, P. (1968). A theory of the calculus of voting. American Political Science Review, 68, 25–42.

    Article  Google Scholar 

  32. Rogoff, K. (1990). Equilibrium political budget cycles. American Economic Review, 80, 21–36.

    Google Scholar 

  33. Rogoff, K., & Sibert, A. (1988). Elections and macroeconomic policy cycles. Review of Economic Studies, 55, 1–16.

    Article  Google Scholar 

  34. Rupasingha, A., Goetz, S., & Freshwater, D. (2006). The production of social capital in US counties. Journal of Socio-Economics, 35, 83–101.

    Article  Google Scholar 

  35. Sakurai, S., & Menezes-Filho, N. (2011). Opportunistic and partisan election cycles in Brazil: New evidence at the municipal level. Public Choice, 148, 233–247.

    Article  Google Scholar 

  36. Shi, M., & Svensson, J. (2006). Political budget cycles: Do they differ across countries and why? Journal of Public Economics, 90, 1367–1389.

    Article  Google Scholar 

  37. Veiga, L., & Veiga, F. (2007). Political business cycles at the municipal level. Public Choice, 131, 45–64.

    Article  Google Scholar 

Download references

Acknowledgements

We thank the Editor and two anonymous referees for useful comments and suggestions. We also thank all participants at 2018 International Institute of Public Finance (Tampere), 2018 Italian Society of Public Economics (Padova), 2019 Public Choice Society (Louisville), 2019 European Public Choice Society (Jerusalem) and at the Department of Economics and Statistics “Cognetti de Martiis” (University of Torino) internal seminar for comments and suggestions. The usual disclaimer applies.

Author information

Affiliations

Authors

Corresponding author

Correspondence to Federico Revelli.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Appendices

Appendix 1

See Table 9.

Table 9 Estimated coefficients on distance from election dummies: municipal budget indicators

Appendix 2

Timing of elections, social capital, and the selection of candidates: the model

In order to clarify the mechanism by which the timing of sacred events can transmit to the process of political selection, we briefly sketch here a theoretical model of expressive voting that relies on Lo Prete and Revelli (2017) and easily lends itself to the analysis of the impact of a temporary boost to social capital on the democratic process. The model has two candidates (labeled by l and r) running for mayoral office in city n (n = 1, …, N) in a “winner-takes-all” race, where the winner sets the ideological policy \( \pi^{x} \), with \( x \in \left\{ {l,r} \right\} \). Voting is driven by the position issue motive \( \pi^{x} \)—with x-type voters liking the policy of candidate x—and by a common value motive given by the valence of candidates in terms of imperfectly observed competence or probity. In particular, each voter j has a set of beliefs \( \left\{ {\iota_{j} ,\kappa_{j} } \right\} \), with \( \iota_{j} \in \left\{ {l,r} \right\} \) being the ideological attachment to either of the candidates’ policies, and \( \kappa_{j} \in \left\{ {l,r} \right\} \) being voter j’s belief about candidates’ valence. Assume that voter j receives a signal \( \kappa_{j} \) before the election about the valence of candidates, and that the signal may or may not match a voter’s ideology \( \iota_{j} \). If the expressive benefit of voting by ideology is larger than the expressive benefit of voting by valence, a voter votes according to \( \iota_{j} \). If the expressive benefit of voting by valence is larger than the expressive benefit of voting by ideology, he votes according to \( \kappa_{j} \), thus accepting to “cross party lines” and vote for the candidate that the signal suggests to be the most valent.

Based on the comparison between the benefits and the costs of voting, the net benefit of turning out to vote (\( e_{j} \)) is:

$$ e_{j} = \left\{ {\begin{array}{*{20}l} {\left[ {i_{j} + v_{j} } \right] - c_{j} } \hfill & {\quad {\text{if}}\quad \iota_{j} = \kappa_{j} } \hfill \\ {\hbox{max} \left\{ {i_{j} ,v_{j} } \right\} - c_{j} } \hfill & {\quad {\text{if}}\quad \iota_{j} \ne \kappa_{j} } \hfill \\ \end{array} } \right. $$
(6)

where i is the expressive benefit of voting by ideology, v is the expressive benefit of voting for the candidate that is believed to be valent, and c is the cost of voting. A voter turns out to vote (\( t_{j} = 1 \)) if the net benefit is positive:

$$ t_{j} = 1(e_{j} > 0) $$
(7)

Clearly, voters are more likely to turn out if the valence signals match their ideological views (\( \iota_{j} = \kappa_{j} \)). Let us assume that \( v_{j} = V \), with V a positive parameter, and that i is independently and uniformly distributed on \( \left[ {0,I } \right] \), with \( I > V \), and cumulative distribution function \( \varPhi = \frac{i}{I} \).

Figure 9 offers a graphical representation of the forces determining how people vote, and whether they turn out to vote. Voters are first ordered according to the relevance of the private value issue i to them, with \( \varPhi \) on the horizontal axis indexing voters’ cumulative distribution function. The fraction of voters \( \varPhi = \frac{V}{I} \) in Fig. 9 has \( i_{j} < V \) and votes according to the valence signal they receive, while the fraction \( 1 - \frac{V}{I} \) has \( i_{j} > V \), and votes ideologically. As for the turnout decision, voters for whom the valence signal matches their ideological views have total benefits from turning out to vote as given by the solid straight line m (i + \( v \)) in Fig. 9, while voters for whom valence signals clash with ideological views have benefits described by the solid piecewise linear curve nm (\( \hbox{max} \left\{ {i,v} \right\} \)). If the cost of voting is homogeneous across voters at \( c_{j} = c > 0 \), all voters for whom the benefits from voting (m or nm) exceed c will turn out, while the others will abstain.

Fig. 9
figure9

Ideology and valence in voting. Note: Graphical representation of the forces determining how people vote, and whether they turn out to vote

Consider now what are the consequences of holding the elections in circumstances (like Patron Saint Day celebrations) that raise the expressive benefit of voting based on the valence of candidate (V). First, Eqs. (1) and (2) and Fig. 9 suggest that, holding everything else constant, an exogenous increase in V raises the rate of turnout. In particular, if the cost of voting c exceeds V, a marginal increase in V raises the turnout rate of voters for whom the valence signal matches their ideological views, leaving the turnout rate of voters for whom the valence signal clashes with their ideology unchanged.Footnote 13 Second, Fig. 9 makes it clear that an exogenous increase in V raises the share of individuals that vote according to the valence of candidates (that is, it shifts the V/I threshold to the right), thus raising the chances that a valent candidate is elected. Consequently, both effects work in the direction of tilting the selection mechanism in favor of the most valent candidates.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Revelli, F., Zotti, R. The sacred and the profane of budget cycles: evidence from Italian municipalities. Int Tax Public Finance 26, 1446–1477 (2019). https://doi.org/10.1007/s10797-019-09574-5

Download citation

Keywords

  • Budget cycle
  • Elections
  • Local taxation
  • Folklore
  • Social capital

JEL Classification

  • H71
  • H72
  • D71