Template-Type: ReDIF-Paper 1.0
Author-Name: Massimo Bordignon
Author-X-Name-First: Massimo
Author-X-Name-Last: Bordignon
Author-Email: massimo.bordignon@unicatt.it
Author-Workplace-Name: Università Cattolica del Sacro Cuore
Author-Workplace-Name: Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore
Author-Name: Veronica Grembi
Author-X-Name-First: Veronica 
Author-X-Name-Last: Grembi
Author-Name: Santino Piazza
Author-X-Name-First: Santino
Author-X-Name-Last: Piazza


Title: Who do you blame in local finance? An analysis of municipal financing in Italy

Abstract: In a political agency model, we study the effect of introducing a less transparent
tax tool for the financing of local governments. We show that lower quality politicians
would use more the less transparent tax tool to enhance their probability of re-election.
This prediction is tested by studying a reform that in 1999 allowed Italian municipalities
to partially substitute a more accountable source of tax revenue (the property tax) with
a less transparent one (a surcharge on the personal income tax of residents). Using a
Difference in Difference approach, we show that in line with theory, Mayors at their
first term in power adopted a higher surcharge on the personal income tax and reduced
the property tax rate significantly more than Mayors in their final term..
Length: 40
Creation-Date: 2015-12
File-URL: http://dipartimenti.unicatt.it/economia-finanza-def035.pdf
File-Format: Application/pdf
File-Function: First version, 2015
Number: def035
Classification-JEL: H71, H77, D78. 
Keywords: Fiscal federalism, Tax transparency, Agency Model, Property tax.
Handle: RePEc:ctc:serie1:def035