Lame Ducks and Local Fiscal Policy: Quasi-Experimental Evidence from Portugal

Abstract

Abstract I use the introduction of mayoral term limits in Portugal to identify how an exogenous variation in eligibility for office affects policy decisions. Relying on a quasi-experimental difference-in-differences approach, I find that term-limited incumbents pursue more conservative fiscal policies than those who are eligible for re-election. Heterogeneous effects show that the treatment effects primarily reflect the behaviour of right-leaning, term-limited incumbents. Results are in line with a model in which right-leaning officeholders try to maintain a good reputation by pleasing an electorate prone to redistribution while they are eligible, but adopt policies closer to their true preferences when term-limited.