Uploaded by Susana Jorge Uploaded date: May 09, 2023
January 17, 2022
This paper investigates which factors affect revenue over-budgeting in the local government, considering budgetary, political, and institutional determinants. It applies dynamic panels analysis to data from Portuguese municipalities between 2005 and 2017. Regarding budgetary arrangements, over-budgeting has implications for several years, taking up to three years to dissipate. The difference between budgeted revenues and the ones collected in the previous year is a good predictor that revenue is overestimated. The ratio of own-source over total revenue is directly related with over-budgeting; however, this effect comes from the municipality’s wealth. About political factors, municipal Executives with political majorities and in electoral years are more prone to over-budget; however, ideology does not seem to be important. As for institutional arrangements, participation in any debt restructuring program is inversely related to over-budgeting, while excessive debt does not seem to play any role. Overall, the only mechanism which reduces over-budgeting misbehavior is external control.
Susana Jorge, Pedro Cerqueira & Sofia Furtado (2022) Municipal revenue over-budgeting: a dynamic analysis of its determinants, Local Government Studies, DOI: 10.1080/03003930.2021.2025359
local finance, budget inflation, budgetary determinants, institutional determinants, political determinants, dynamic panel analysis
Type of Paper