The impact of fiscal decisions on local elections: an exploratory study of Portugal

The analysis of fiscal performance is a hot topic either to policy makers or researchers and fiscal discipline is a key value in public finance management at the national and local levels. This growing attention to discipline may be explained with fiscal crisis and strict resource limitations, since in the three last decades a large part of those governments had high and persistent deficits and public debt. Fiscal performance may also be an instrument that voters considered at the ballots. Elections are the main accountability instrument, used by voters to evaluate the incumbent’s performance. Voters elected the incumbents if they consider satisfactory their performance; or otherwise they elect opponent candidates. The objective of this paper is to analyze relationship between several dimensions of fiscal performance and the probability of incumbent re-election, focusing on 2005 municipal elections. Based on public finance and public choice literatures we test some well-known hypothesis such as fiscal illusion and fiscal conservatism of voters