Polity size and the congested budget: evidence from italian municipalities
THE JOURNAL OF POLITICS, ForthcomingOnce in office, politicians propose policies aimed at maintaining the support of their constituencies. This form of political activism increases with polity size – i.e., the number of politicians in government – but it may clash with capacity constraints, leading to a congestion effect whereby politicians’ plans are not enacted in practice. With novel data on Italian municipalities, we estimate the causal effect of polity size on a battery of planned and actual budget outcomes. We leverage a reform that introduced a new temporary population threshold where polity size changed discontinuously and estimate local treatment effects with a difference-indiscontinuities design. We document a congestion effect. Municipalities with larger polities have a larger planned budget which does not translate into a larger actual budget. The congestion effect decreases when bureaucratic capacity is high, proving how administrative capacity can be a binding constraint for politicians’ behavior.