Working papers results

The aim of this paper is to study whether politicians manipulate fiscal policy to extract private rents. We focus on the local personal income tax (PIT), in the setting of Italian cities, which is a progressive instrument that allows mayors to set different rates to distinct wage groups. We exploit discontinuities in mayors’ salaries, that are based on population thresholds, to study whether mayors systematically apply lower rates to their own tax bracket. The main results document large rent-seeking activity in fiscal policy. First, we show that when mayors’s salary is exogenously located in the following tax bracket this receives a significantly lower tax rate than the previous bracket, compared to the control group. Second, we show that this rent-seeking activity is highly detrimental for the public treasury, with a considerable reduction in fiscal revenues. And finally, we document that the monetary gains for rent-seeker politicians are rather limited. These results suggest that when fiscal policy is prone to be manipulated politicians do not hesitate to engage in rent-seeking activities even in case of little profits.

Proportional electoral rules favour the election of women with respect to majoritarian ones. This is consistent with the fact that in majoritarian systems personal exposure of the candidate is more relevant than in proportional systems and that women tend to be averse to such exposure. To test the effects of electoral rules on women’s representation and the quality of politicians, we collect panel data on the universe of Italian politicians from all levels of government over the period 1987-2013 and analyse an Italian reform which, in 2005, changed the electoral rule for national elections from (mostly) majoritarian to proportional, but did not affect subnational level elections. We find that this reform increased the number of women elected, while not decreasing the quality of politicians. We provide evidence of a negative selection effect under proportional rules: the elected women are not the best candidates and the quality of elected politicians could have increased (rather than remain constant) if the best female candidates had been elected. Our results are stronger in gender traditional regions, suggesting that culture matters in terms of how electoral rules affect female political representation.