The purpose of this paper is to analyse, in terms of presence, determinants and purposes, the misrepresentation of expected revenues during budget formulation and the misrepresentation of actual revenues during budget execution. To this end, we use sixyear panel data from Italian municipalities with populations above 15,000. Our results suggest that overestimations of current revenues are more frequent than underestimations, during both budget formulation and budget execution. In terms of determinants, our results highlight the impact on revenue misrepresentation of both political orientation and fiscal stress. Finally, in terms of purposes, we show that revenue underestimation during budget formulation and revenue overestimation during budget execution may contribute to the formation of surpluses. The former, in particular, may allow mayors to create a ‘war chest’ in non-election years, which can then be used to increase net borrowing on the eve of elections.

(2015). Biased budgeting in the public sector: evidence from Italian local governments [journal article - articolo]. In LOCAL GOVERNMENT STUDIES. Retrieved from http://hdl.handle.net/10446/50519

Biased budgeting in the public sector: evidence from Italian local governments

Sicilia, Mariafrancesca
2015-01-01

Abstract

The purpose of this paper is to analyse, in terms of presence, determinants and purposes, the misrepresentation of expected revenues during budget formulation and the misrepresentation of actual revenues during budget execution. To this end, we use sixyear panel data from Italian municipalities with populations above 15,000. Our results suggest that overestimations of current revenues are more frequent than underestimations, during both budget formulation and budget execution. In terms of determinants, our results highlight the impact on revenue misrepresentation of both political orientation and fiscal stress. Finally, in terms of purposes, we show that revenue underestimation during budget formulation and revenue overestimation during budget execution may contribute to the formation of surpluses. The former, in particular, may allow mayors to create a ‘war chest’ in non-election years, which can then be used to increase net borrowing on the eve of elections.
journal article - articolo
2015
Anessi-Pessina, Eugenio; Sicilia, Mariafrancesca
(2015). Biased budgeting in the public sector: evidence from Italian local governments [journal article - articolo]. In LOCAL GOVERNMENT STUDIES. Retrieved from http://hdl.handle.net/10446/50519
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