Political budget cycles , soft budget constraint , local governments , decentralization
Abstract:
This paper examines whether revenue decentralization and direct external
financial supervision affect the incidence and strength of political budget
cycles, using a panel of Israeli municipalities during the period 1999-2009.
We find that high dependence on central government transfers—as
reflected in a low share of locally raised revenues in the municipality’s
budget—exacerbates political budget cycles, while tight
monitoring—exercised through central government appointment of
external accountants to debt accumulating municipalities—eliminates
them. These results suggest that political budget cycles can result from
fiscal institutions that create soft budget constraints: that is, where
incumbents and rational voters can expect that the costs of pre-election
expansions will be partly covered later by the central government.
Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.
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