A comprehensive test of yardstick competition exploiting an italian natural experiment
Do fiscal decisions of incumbent mayors affect their probability of being re-elected? Do they consider the fiscal decisions of the neighboring mayors when they face an election? And do these strategic interactions remain stable over time, or do voters become more/less alert of, and incumbent mayors more/less reactive to, the decisions taken in nearby jurisdictions in successive electoral rounds? Fabio Padovano and Ilaria Petrarca provide rigorous analysis of those questions, based on empirical data on Italian municipalities.