Online Appendix
Data
Financial variables: from the Italian Ministry of the Interior http://finanzalocale.interno.it/sitophp/home_finloc.php?Titolo=Certificati+Consuntivi

Taxes: total real direct taxes by municipality (year 2008 constant euros per capita).

Charges: total real charges and profits (year 2008 constant euros per capita).

Total own revenue: total real revenue net of borrowing (year 2008 constant euros per capita).

Current expenditure: total real public current expenditure (year 2008 constant euros per capita).
Political variables: the authors' processing of data from the Italian Ministry of the Interior http://amministratori.interno.it/AmmIndex5.htm http://elezionistorico.interno.it/index.php?tp=G

Large: dummy variable equal to one when the municipality has certified population of more than 15,000, and zero otherwise.
 Termlim: dummy variable equal to one when the mayor of the municipality cannot run for the next election because he/she is already in his/her second term of office, and zero otherwise.
 Voteshare: percentage of votes obtained by the mayor when elected (the variable refers to the first round of voting for double-ballot municipalities)

List: number of lists supporting (at first ballot) the successful mayoral candidate in a large municipality (with a certified population of more than 15,000).
Demographic and socio-economic variables: from the Italian Ministry of the Interior http://finanzalocale.interno.it/ser/ispett.html
Italian Institute of Statistics (ISTAT) www.istat.it/dati/catalogo/20061102_00/

Income: real personal income tax base (year 2006 constant euros per capita).

Population: municipality population.

Aged: share of the population over the age of 65.

Child: share of the population aged between 0 and 14.
 Foreign residents: share of the foreign residents population
 Dens: the number of citizens per area.

Table A1: Small and large municipalities by year. Sample size 10,000 - 20,000 inhabitants
Year Small Large Total
2001
2002
2003
2004
2005
2006
2007
Total Observations
Mean
375
382
385
384
375
372
371
2,644
378
117
120
124
131
129
123
143
887
127
492
502
509
515
504
495
514
3,531
504

Table A2: Small and large electoral regimes and years of elections for switching municipalities
Municipality 2001 2002 2003 2004 2005 2006 2007
Adelfia
Arona
Bareggio
Baronissi
Bellaria-Igea Marina
Budrio
Bussolengo
Calenzano
Campagna
Casagiove
Casamassima
Caselle Torinese
Castel Maggiore
Castellanza small large small small small small small large small small small small small large large large small small small large large large large small small small large large large small large small large large large small large small large large large large small small large large large large large small small small large large large large small small large large large large large large large large large large small small small small large large large large large small small small small small small large small small small large large large large large large large small small small small
Cerea
Corciano
Fiesole
Frattaminore
Ghedi
Gualdo Tadino
Impruneta
Malnate
Maranello
Mentana
Monte Sant'Angelo
Negrar
Palagiano
Pavullo nel Frignano
Pianoro
Policoro small small large small small small large small small
.
. small small large small small small large small small small small small large small small small small small small small small large small small large large small small large small small large small large large large small small large small small large small large large large small small large large large large small large large large small large large large large large large large large small small small small large large large large
. small small small small small large small small small small small large large small small small large large large large small small small small small large .
Rosarno
Sabaudia
Signa
Spoltore small small large large large large large small small small small small small large small small small large large large large
. small small small small small large
Tarquinia
Terzigno small small small small small small large small small small large large large large
Trecate small small small small small large large
Umbertide small small small large large large large
Notes: missing value are represented by dots.
Years of election
2001 and 2006
1998,2002 and 2005
1998 and 2003
1998 and 2003
1999 and 2004
1997,2002 and 2007
1998 and 2003
1999 and 2004
1998 and 2003
2001 and 2006
2001 and 2003
1998, 2002 and 2007
1999 and 2004
1999, 2004 and 2006
1998, 2002 and 2007
1999 and 2004
1999 and 2004
1998,2002,2005 and 2007
1999 and 2004
2000 and 2004
1998 and 2003
1997,2002 and 2007
1999 and 2004
2002 and 2006
2002 and 2007
1999 and 2004
2002 and 2007
2001 and 2006
1999 and 2004
2001 and 2006
1998,2003 and 2006
1998,2002 and 2007
1999 and 2004
2002 and 2007
1998,2002 and 2007
1999,2004 and 2007
2001 and 2006
1999 and 2004

Table A3: Number of lists by small and large municipalities. Municipalities between 10,000-20,000 inhabitants
Small Large
N°lists
1
Total
Obs
2,644
2,644
N° of municipalities
(average across 2001-2007) %
378 100
378 100
N°lists
1
2
3
4
5
6
>7
Obs
164
65
192
166
136
108
56
887
N° of municipalities
(average across 2001-2007) %
23 18
9
27
24
19
15
8
127 100
7
22
19
15
12
6

Table A4: Specification test of whether covariates have an effect at the discontinuity cut-off point
Estimations without covariates
Polynomial order child old dens income votshare termlim
(1) (2) (3) (4) (5) (6) foreign residents
(7)
1st large large*list
-0.18
(0.17)
-0.27** -7.10 167.41
(0.13) (8.46) (118.64)
0.01
(0.02)
0.01
(0.02)
0.88
(1.08)
6.73
(19.65)
-0.83
(2.99)
-0.94*
(0.50)
-0.18
(0.18)
0.05*
(0.03)
-0.55*
(0.31)
0.11**
(0.05)
2nd large large*list
-0.27
(0.17)
0.01
(0.02)
-0.22* -3.28 189.30**
(0.13) (5.57) (93.97)
0.02 0.93 7.26
(0.02) (1.09) (19.83)
-1.43
(2.97)
-0.95*
(0.50)
-0.22
(0.18)
0.05*
(0.03)
-0.57*
(0.29)
0.10**
(0.05)
3rd large large*list
-0.25
(0.18)
0.01
(0.02)
-0.23* -1.56 194.80**
(0.13) (5.46) (96.80)
0.02 0.99
(0.02) (1.09)
7.05
(19.90)
-1.83
(3.03)
-0.96*
(0.50)
-0.22
(0.19)
0.05*
(0.03)
-0.56*
(0.31)
0.10**
(0.05)
4th large -0.34 -0.23 0.64 202.10* -3.88 -0.13 -0.44 large*list
5th large large*list
6th large large*list
Overall Observations
Observations small municipalities
(0.22)
0.01
(0.02)
-0.38*
(0.22)
0.01
(0.02)
-0.38
(0.23)
0.01
(0.02)
3,531
2,644
(0.15)
0.02
(0.02)
-0.23
(0.14) (6.44) (119.09)
0.02
(0.02) (1.09)
-0.21
(0.15) (6.84) (137.59)
0.02
(7.52)
1.00
(1.11)
-6.41
0.84
-8.42
0.87
(0.02) (1.09)
3,531 3,531
2,644 2,644
(114.90)
7.23
(20.06)
201.23*
6.89
(19.76)
177.27
7.49
(19.86)
3,531
2,644
(3.47)
-0.99**
(0.50)
-3.37
(3.37)
-0.97**
(0.49)
-3.89
(3.42)
-0.96*
(0.49)
3,531
2,644
(0.20)
0.05*
(0.03)
-0.18
(0.20)
0.05*
(0.03)
-0.20
(0.21)
0.05*
(0.03)
3,531
2,644
(0.34)
0.10**
(0.05)
-0.51
(0.32)
0.10**
(0.05)
-0.47
(0.33)
0.10**
(0.05)
3,531
2,644
Observations large municipalities 887 887 887 887 887 887 887
R-squared 0.97 0.99 0.99 0.98 0.70 0.42 0.94
Notes: Period 2001-2007; municipalities with a resident population of between 10,000 and 20,000 inhabitants. Estimation methods: polynomial approximation to the 1st,2nd,3rd,4th,5th and 6th degrees. All estimates include municipality and year fixed effects. The variables child, old and foreign residents have been rescaled by multiplying by 100. Robust standard errors, clustered at municipal level, are reported in brackets. The R-squared is obtained by taking the average R-squared of each polynomial order across regressions. Significance at the 10% level is represented by *, at the 5% level by **, and at the 1% level by ***.

Table A5: Specification test of whether large is as good as randomly assigned
Dependent variable: large termlim child old dens income votshare polynomial order foreign resident
1st
(1)
-0.01
(0.01)
-0.09
(0.92)
-1.98**
(0.83)
-0.87
(0.74)
0.07
(0.06)
-3.08
(5.53)
-0.80*
(0.48)
2nd
(2)
-0.01
(0.01)
-0.55
(0.84)
-1.47*
(0.80)
-0.48
(0.47)
0.07
(0.04)
-3.86
(4.78)
-0.56
(0.43)
3rd
(3)
-0.01
(0.01)
-0.43
(0.82)
-1.48*
(0.79)
-0.30
(0.42)
0.07
(0.04)
-4.50
(4.93)
-0.57
(0.43)
4th
(4)
-0.01
(0.01)
-0.83
(0.83)
-1.12*
(0.67)
-0.06
(0.51)
0.06
(0.04)
-5.47
(4.47)
-0.20
(0.39)
5th
(5)
-0.01
(0.01)
-0.81
(0.79)
-0.97
(0.61)
-0.52
(0.35)
0.05
(0.04)
-4.54
(3.84)
-0.23
(0.37)
F-test p-value
Overall Observations
1.64
0.1227
3,531
1.17
0.3193
3,531
1.27
0.2652
3,531
1.1
0.3647
3,531
1.56
0.1462
3,531
1.41
0.1979
3,531
Observations small municipalities
Observations large municipalities
2,644
887
2,644
887
2,644
887
2,644
887
2,644
887
2,644
887
R-squared 0.96 0.96 0.97 0.97 0.98 0.98
Notes: Period 2001-2007; municipalities with a resident population of between 10,000 and 20,000 inhabitants. Estimation methods: polynomial approximation to the 1st,2nd,3rd,4th,5th and 6th degrees. The variables votshare, dens and income have been rescaled by dividing by 10,000. All estimates include municipality, year fixed effects and the interaction term (large*list). Robust standard errors, clustered at municipal level, are reported in brackets. Significance at the 10% level is represented by *, at the 5% level by **, and at the 1% level by ***.
6th
(6)
-0.01
(0.01)
-0.82
(0.80)
-0.87
(0.60)
-0.63*
(0.37)
0.05
(0.04)
-5.12
(3.91)
-0.19
(0.37)

Table A6: Placebo tests on fiscal policy outcomes: “fake” threshold of 12,057 inhabitants. RDD estimates with fixed effects
Median below (12,057)
A. Estimations without covariates B. Estimation with covariates
Polynomial order total own revenue taxes charges current expenditure total own revenue taxes charges current expenditure
1st large large*list
2nd large large*list
3rd large large*list
(1)
-0.97
(24.13)
-8.59
(6.56)
-0.28
(26.62)
-8.04
(6.58)
-0.27
(28.04)
-7.99
(6.57)
(2)
13.23
(3)
-14.21
(11.99) (20.99)
-9.34* 0.75
(4.87) (5.02)
11.20
(14.14)
-8.87*
(4.88)
15.61
(16.99)
-8.82*
(4.86)
-11.48
(22.05)
0.83
(5.04)
-15.88
(21.89)
0.83
(5.06)
(4)
-17.15
-21.29
(23.12)
1.96
(6.55)
-14.29
(24.00)
(21.43)
1.84
(6.55)
-11.32
(22.55)
2.02
(6.53)
(1)
-0.34
(23.20)
-8.63
(6.51)
-1.69
(25.77)
-8.14
(6.57)
-0.65
(27.31)
-8.14
(6.57)
(2)
14.44
(3)
(11.91) (20.50)
-9.51* 0.88
(4.91)
11.78 -13.47
(14.04) (21.73)
-9.07*
(4.93)
-9.05*
(4.91)
-14.77
(4.95)
0.94
(4.99)
16.25 -16.89
(16.91) (21.68)
0.91
(5.01)
(4)
-18.35
(20.82)
3.30
(6.28)
-12.53
(21.95)
3.38
(6.28)
-23.94
(22.55)
3.26
(6.31)
4th large large*list
5th large large*list
6th
16.00
(30.44)
-8.02
(6.56)
10.20
(32.62)
-8.97
(6.45)
32.68
(20.31)
-8.83*
(4.87)
22.11
(23.13)
-9.09*
(4.85)
-16.69
(22.03)
0.81
(5.04)
-11.92
(22.28)
0.12
(5.01)
1.94
(6.62)
-5.97
(24.65)
1.22
(6.61)
11.91
(29.69)
-8.17
(6.57)
4.80
(31.68)
-8.99
(6.49)
32.04 -20.13
(20.30) (21.71)
-9.08*
(4.93)
-9.30*
(4.91)
0.91
(4.98)
21.09 -16.29
(23.20) (21.77)
0.30
(5.00)
-19.71
(23.25)
3.25
(6.37)
-12.90
(23.63)
2.64
(6.40) large 4.57
(36.02)
25.02 -20.45
(26.77) (22.95)
0.17
(25.86)
-0.83
(34.89)
25.04 -25.88
(26.99) (22.27)
-8.36
(25.01) large*list -9.25
(6.54)
-9.05* -0.19
(4.84) (4.96)
1.16
(6.61)
-9.28
(6.60)
-9.26*
(4.89)
-0.02
(4.96)
2.57
(6.40)
Overall Observations 2,423 2,423 2,423 2,423 2,423 2,423 2,423 2,423
R-squared 0.88 0.89 0.76 0.87 0.88 0.89 0.76 0.88
Notes: Period 2001-2007; municipalities with a resident population of between 10,000 and 15,000 inhabitants. Estimated discontinuities in fiscal policy outcome at fake threshold (median below the true 15,000 threshold). Estimation methods: polynomial approximation to the 1st, 2nd, 3rd, 4th, 5th and 6th degrees. All estimates include municipality and year fixed effects. The estimations in panel B also includes the following covariates: mayor's lame-duck dummy, percentage of votes obtained by the mayor when elected (for the double ballot we consider the votes obtained at the first round), share of population aged between 0 and 14, share of population over 65 years, share of foreign residents, population density computed as the ratio between population and area, per capita personal income tax base. Robust standard errors, clustered at municipal level, are reported in brackets. The Rsquared is obtained by taking the average R-squared of each polynomial order across regressions. Significance at the 10% level is represented by *, at the 5% level by **, and at the 1% level by ***.

Table A7: Placebo tests on fiscal policy outcomes: “fake” threshold of 16,957 inhabitants. RDD estimates with fixed effects
Median above (16,957)
A. Estimations without covariates B. Estimation with covariates
Polynomial order total own revenue taxes charges current expenditure total own revenue taxes charges current expenditure
1st large large*list
2nd large large*list
3rd large large*list
(1)
-8.09
(20.05)
6.92
(5.00)
2.55
(22.86)
6.91
(4.93)
2.21
(29.49)
6.95
(4.97)
(2)
17.33
(2.46)
21.11
(16.81)
-0.91
(2.47)
23.79
(18.39)
-0.92
(2.47)
(3)
-25.42
(14.98) (15.55)
-0.87 7.79*
(3.99)
-18.56
(18.55)
7.81**
(3.92)
-21.58
(25.38)
7.87**
(3.95)
(4)
-0.48
13.47
(33.34)
5.22
(5.37)
29.85
(39.98)
(22.59)
5.27
(5.34)
3.44
(26.40)
5.30
(5.31)
(1)
-18.02
(19.39)
8.70*
(4.75)
-7.81
(21.51)
8.66*
(4.66)
-2.15
(28.19)
8.69*
(4.67)
(2)
13.66
(13.88) (17.20)
-0.20 8.90**
(2.12)
16.91
(14.83)
-0.22
(2.13)
22.74
(17.42)
-0.23
(2.13)
(3)
-31.68*
(4.17)
-24.72
(19.27)
8.88**
(4.09)
-24.89
(25.93)
8.92**
(4.09)
(4)
-8.64
(25.40)
6.13
(5.66)
-2.10
(28.83)
6.11
(5.61)
12.52
(35.69)
6.07
(5.65)
4th large large*list
5th large large*list
6th
-21.37
(34.50)
6.96
(5.01)
-38.47
(39.36)
7.06
(4.99)
6.93
-0.90
(2.46)
9.03
(24.93)
-0.91
(2.47)
-28.29
(21.17) (29.18)
7.86*
(3.99)
-47.50
(32.25)
7.97**
(3.98)
5.06
(5.51)
23.03
(44.54)
5.08
(5.51)
-20.46
(32.68)
8.71*
(4.72)
-41.16
(37.30)
8.85*
(4.69)
8.70
(20.02)
-0.21
(2.13)
6.50
(23.86)
-0.19
(2.13)
-29.16
(29.44)
8.92**
(4.12)
-47.66
(31.50)
9.04**
(4.10)
32.57
(41.30)
5.87
(5.77)
22.01
(46.63)
5.90
(5.78) large -27.84
(47.75)
16.80 -44.63
(28.72) (41.83)
41.93
(53.88)
-30.46
(45.60)
16.59 -47.05
(27.44) (40.73)
41.08
(55.75) large*list 6.90
(5.02)
-0.85
(2.47)
7.75*
(4.04)
4.62
(5.53)
8.69*
(4.74)
-0.22 8.91**
(2.12) (4.17)
5.50
(5.83)
Overall Observations 1,108 1,108 1,108 1,108 1,108 1,108 1,108 1,108
R-squared 0.89 0.86 0.81 0.88 0.90 0.87 0.81 0.89
Notes: Period 2001-2007; municipalities with a resident population of between 15,000 and 20,000 inhabitants. Estimated discontinuities in fiscal policy outcome at fake threshold (median above the true 15,000 threshold). Estimation methods: polynomial approximation to the 1st, 2nd, 3rd, 4th, 5th and 6th degrees. All estimates include municipality and year fixed effects. The estimations in panel B also includes the following covariates: mayor's lame-duck dummy, percentage of votes obtained by the mayor when elected (for the double ballot we consider the votes obtained at the first round), share of population aged between 0 and 14, share of population over 65 years, share of foreign residents, population density computed as the ratio between population and area, per capita personal income tax base. Robust standard errors, clustered at municipal level, are reported in brackets. The Rsquared is obtained by taking the average R-squared of each polynomial order across regressions. Significance at the 10% level is represented by *, at the 5% level by **, and at the 1% level by ***.

Table A8: Local Linear Regression results using optimal bandwidth (h=1,500)
LLR
A. Estimations without covariates total own revenue taxes charges current expenditure
B. Estimations with covariates total own revenue taxes charges current expenditure
(1) (2) (3) (4) (1) (2) (3) (4) large -59.72** -30.82 -28.90
(29.68) (22.21) (17.98)
6.80 4.72 2.07
-44.39*
(26.33)
6.53
-73.73** -38.75* -34.98* -51.39**
(30.90) (23.12) (18.89)
9.43** 5.77 3.66
(25.15)
9.92** large*list
(4.13) (3.97) (2.50) (4.94) (3.88) (4.00) (3.61) (3.84)
Overall Observations 1,018 1,018 1,018 1,018 1,018 1,018 1,018 1,018
R-squared 0.91 0.89 0.84 0.90 0.91 0.89 0.84 0.91
Notes: Period 2001-2007; municipalities with a resident population of between 13,500 and 16,500 inhabitants. Estimation methods: local linear regression with bandwidth h=1,500. All estimates include municipality and year fixed effects. The estimations in panel B also includes the following covariates: mayor's lame-duck dummy, percentage of votes obtained by the mayor when elected (for the double ballot we consider the votes obtained at the first round), share of population aged between 0 and 14, share of population over 65 years, share of foreign residents, population density computed as the ratio between population and area, per capita personal income tax base. Robust standard errors, clustered at municipal level, are reported in brackets. Significance at the
10% level is represented by *, at the 5% level by **, and at the 1% level by ***.
Table A9: Local Linear Regression results using half the optimal bandwidth (h/2=750)
LLR
A. Estimations without covariates total own revenue taxes charges current expenditure
B. Estimations with covariates total own revenue taxes charges current expenditure large
(1) (2) (3) (4) (1) (2) (3) (4)
-80.58*** -48.63** -31.96* -73.87*** -94.01*** -60.17*** -33.84 -74.77*** large*list
(27.29) (19.61) (19.10)
11.56*** 9.32** 2.23
(27.00)
11.94**
(29.13) (17.54) (22.24)
14.46*** 10.56*** 3.90
(25.52)
15.69***
(4.08) (4.40) (2.30) (5.38) (4.07) (3.34) (3.94) (4.21)
Overall Observations 515 515 515 515 515 515 515 515
R-squared 0.91 0.89 0.87 0.91 0.92 0.90 0.87 0.91
Notes: Period 2001-2007; municipalities with a resident population of between 14,250 and 15,750 inhabitants. Estimation methods: local linear regression with bandwidth h/2=750. All estimates include municipality and year fixed effects. The estimations in panel B also includes the following covariates: mayor's lame-duck dummy, percentage of votes obtained by the mayor when elected (for the double ballot we consider the votes obtained at the first round), share of population aged between 0 and 14, share of population over 65 years, share of foreign residents, population density computed as the ratio between population and area, per capita personal income tax base. Robust standard errors, clustered at municipal level, are reported in brackets. Significance at the
10% level is represented by *, at the 5% level by **, and at the 1% level by ***.

Table A10: Local Linear Regression results using two times the optimal bandwidth (2h=3,000)
LLR
A. Estimations without covariates total own revenue taxes charges current expenditure
B. Estimations with covariates total own revenue taxes charges current expenditure large
(1) (2) (3)
-41.48* -23.72 -17.76
(4)
-30.03
(1) (2) (3)
-54.28** -28.21 -26.06
(4)
-40.94* large*list
(23.92) (17.91) (16.77)
4.91 1.98 2.93
(23.01)
4.25
(23.45) (17.77) (17.29)
6.66* 2.25 4.41
(21.97)
6.16
(3.86) (3.11) (3.07) (4.18) (3.71) (3.05) (3.20) (3.95)
Overall Observations 2,098 2,098 2,098 2,098 2,098 2,098 2,098 2,098
R-squared 0.86 0.86 0.77 0.86 0.87 0.86 0.77 0.87
Notes: Period 2001-2007; municipalities with a resident population of between 12,000 and 18,000 inhabitants. Estimation methods: local linear regression with bandwidth 2h=3,000. All estimates include municipality and year fixed effects. The estimations in panel B also includes the following covariates: mayor's lame-duck dummy, percentage of votes obtained by the mayor when elected (for the double ballot we consider the votes obtained at the first round), share of population aged between 0 and 14, share of population over 65 years, share of foreign residents, population density computed as the ratio between population and area, per capita personal income tax base. Robust standard errors, clustered at municipal level, are reported in brackets.
Significance at the 10% level is represented by *, at the 5% level by **, and at the 1% level by ***.
Figure A1: Per capita total own revenue (taxes+charges) using optimal bandwidth (h=1,500)
-2000 -1000 0
Normalized population
1000 2000
Notes: Period 2001-2007; municipalities with population between 13,500 and 16,500 inhabitants.
Dependent variable: per capita total own revenue (taxes+charges). The solid line is the fitted value from a linear regression model estimated separately on each side of the cut-off. Scatter points are averaged over a bandwidth of 25 bins at either side of the normalized population size (i.e, population minus 15,000). Each bins on the left of the cut-off contains on average 21 observations, while each bins on the right of the cutoff includes on average 19 observations.

Figure A2: Per capita current expenditure using optimal bandwidth (h=1,500)
-2000 -1000 0
Normalized population
1000 2000
Notes: Period 2001-2007; municipalities with population between 13,500 and 16,500 inhabitants.
Dependent variable: per capita current expenditure. The solid line is the fitted value from a linear regression model estimated separately on each side of the cut-off. Scatter points are averaged over a bandwidth of 25 bins at either side of the normalized population size (i.e, population minus
15,000). Each bins on the left of the cut-off contains on average 21 observations, while each bins on the right of the cut-off includes on average 19 observations