Separating the accountability and competence effects of mayors on municipal spending

The Italian legislation provides a two-term limits for mayors, but it allows term-limited mayors to pass on the torch to one of their deputies as candidates for mayorship. We exploit this feature of the electoral system to design a novel identification strategy for separating the effects of 'accountability' (the difference in performance between two politicians facing different incentives in terms of re-elections) and 'competence' (the difference in performance between two politicians with different experience in policy making). Using a panel of 1203 Italian municipalities, from 1998 to 2015, we find a significant role for competence but not for accountability in affecting municipal spending. Specifically, second-and-last-term mayors, and first-term mayors with previous experience as executive officers, spend less, on average, than inexperienced first-term mayors. We also discuss the policy implications of this finding.