Political Budget Cycles and Politicians’ Rents of Being in Power. Some Evidence Using a Dynamic Panel Approach with Italian Regional Data

This work uses two qualitatively different panel sets of Italian regions‟ data from 1997 to 2007 in order to examine the relation between fiscal Ente regionale‟s policy and elections. By implementing the GMM estimator developed by Arellano and Bond (1991), Arellano and Bover (1995) and Blundell and Bond (1998), evidence of an increase of spending of the aforementioned institutions has been detected, supporting the hypothesis of existence of political budget cycles at this sub-national level of government. However, the abovementioned phenomenon does not arise throughout the considered sample but, as supposed by Shi and Svensson (2006) and Persson and Tabellini (2002), there seems to exist a correlation between higher spending and some institutional features of a territory, ultimately pointing to different levels of rent extraction‟s activity of incumbents.