Political Budget Cycle and Opportunistic Local Government Revenue Policies

This study explores whether and to what degree local government elections disrupt the collection and, ultimately, the structure of local government revenues. Using panel data from all Macedonian municipalities from 2008 to 2020, we test the presence of incumbents’ opportunistic fiscal policies related to local elections. The two main policy variables considered in the study are elections and mayoral political alignment with the Prime Minister’s ruling coalition. The results indicate that revenues from taxes, the general fund, and own sources decline during an election year, but revenues from donations (mainly from the central government) increase. Revenues from own sources increase in the post-election year. While earmarked revenues are unaffected during an election year, they increase post-election. This study provides evidence that local elections play a significant role in implementing local revenue policies.