Essays on Local Government Economics

This dissertation addresses the principal-agent conflict in Italian local government by empirically investigating how mayoral heterogeneity, institutional fiscal constraints, and electoral dynamics shape local public policy outcomes. Chapter 1 examines the influence of the mayor’s generational affiliation on the composition of local public ex- penditure. Results indicate that mayors from older generations allocate larger share of current expenditure to environmental services. This higher allocation is empiri- cally linked to increased costs in environment management, particularly in areas like waste disposal services. Chapter 2 analyzes the impact of central intergovernmental transfers on local government spending behavior, focusing on the Italian context. The chapter provides an extensive review on the literature related to the flypaper effect, and confirms results presented in the literature with an empirical exercise which exploits an instrumental variable derived from a peculiar reform of Italian municipal transfers from the central government. Chapter 3 explores a non-partisan explanation for the incumbency advantage by studying the electoral impact of high- visibility community events. Utilizing the quasi-random timing of the Patron Saint Day celebration relative to municipal elections, the study finds a significant increase in the incumbent mayor’s re-election probability. This effect suggests that the suc- cessful execution of such events serves as a signal of administrative competence to the electorate.