Who Do You Blame in Local Finance? An Analysis of Municipal Financing in Italy

A 1999 reform allowed Italian Mayors 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). Theoretical analysis suggests this should give incompetent Mayors a less costly way to hide themselves, so allowing them to be more easily re-elected. An empirical analysis on Piedmont municipalities confirms these hypotheses.

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