Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/112755 
Year of Publication: 
2015
Series/Report no.: 
ZEW Discussion Papers No. 15-046
Publisher: 
Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim
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.
Subjects: 
political budget cycles
soft budget constraint
local governments
decentralization
JEL: 
D72
H72
H74
E62
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
318.09 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.