Do electoral incentives affect immigration policy decisions? I study this question in the setting of Italian municipalities making decisions about the reception of refugees. The localized control of the reception policy (SPRAR), combined with the exogenous timing of policy decisions and staggered elections, enables me to study the effect of electoral incentives on the reception of refugees. Although municipalities receive substantial fiscal grants from the central government for hosting refugees, electoral incentives reduce the probability of opening a refugee reception centre by 24 per cent. The effect is driven by municipalities with higher shares of extreme-right voters, and migrants, and is persistent in the medium-long run. The results suggest two potential drawbacks of elections: first, the heterogeneity behind the negative effect may explain why is difficult to reach an equal redistribution of refugees across and within countries. Second, the fear of losing popular support induces municipal governments to give up fiscal grants that could benefit the local economy.

Many countries have recently introduced fiscal rules to constrain governments’ fiscal policies and action. Despite the wide adoption, there is little evidence on the consequences of fiscal rules for the quality of government. I use data from Italian municipalities to study how fiscal rules affect the selection of politicians. In 1999, the Italian government applied fiscal rules to all municipalities, and in 2001 it removed them for municipalities with less than 5000 inhabitants. Using a Difference-in-Discontinuity (Diff-in-Disc) design, which enables control for an institutionally mandated increase in the wage paid to politicians at the 5000-inhabitant threshold, I provide the following empirical evidence: 1) fiscal rules negatively affect the quality of politicians, and in particular their level of education; 2) consistent with the idea that competent individuals enter politics if they are given enough discretion, the effect is driven by municipalities with low deficits; 3) fiscal rules offset the positive effect of the wage increase on the selection of politicians.

Recently several countries have experienced a drop in popularity of national political parties, accompanied by the success of independent movements (e.g. Civic Lists in Italy). I exploit the success of Civic Lists in Italian municipalities and use them as a comparison group for party-affiliated politicians, to test whether national parties affect fiscal discipline. In particular, using a Regression Discontinuity Design (RDD), I show that party-affiliated mayors are more fiscally responsible: they run lower deficits, accumulate less debt and reduce expenditures. The effect is significant only for municipalities not constrained by fiscal rules. This suggests that national parties act as a substitute for fiscal rules in constraining politicians. Besides that, I provide evidence that the discipline of party-affiliated politicians is linked to better career prospects: party-affiliated mayors have a higher probability of being re-elected and better chances of being promoted to higher levels of government. Finally, the results are not driven by political orientation, alignment with the central government, the presence of criminal organisations nor by unobserved political ability.

In a model of politics with different types of politicians, following a tax decentralisation reform, politicians with high administrative skills are elected in rich municipalities and politicians with high political skills are elected in poor municipalities. As a result, voter welfare increases only, or mainly, in rich municipalities. These results provide a different rationale for the observed poor performance of local governments largely financed by grants. We test these predictions by exploiting the decentralisation reforms in Italy in the 90s. These reforms introduced the direct election of the mayor and new autonomous tax tools, that affected differently rich and poor municipalities because of the differences in their tax bases. Results support our predictions and are robust to several alternative stories.