Separating the Accountability and Competence Effects of Mayors on Municipal Spending

The Italian legislation provides a two-term limits for mayors, but it allows term limited mayors to pass on the torch to their deputies as candidates for mayorship. We exploit this feature of the electoral system to design a novel identification strategy for separating ‘accountability’ (the difference in performance between two politicians facing different incentives in terms of reelections) and ‘competence’ (the difference in performance between two politicians with different experience in policy making). Using a panel of 1,203 Italian municipalities, from 1998 to 2006, we find a significant role for competence but not for accountability on municipal spending. Specifically, second-and-last-term mayors, and first-term mayors with previous experience as executive officers, spend less, on average, than inexperienced first-term mayors. We also discuss the policy implications of this finding.