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Stijn Goeminne, Benny Geys
and Carine Smolders
Political Fragmentation and Projected Tax
Revenues: Evidence from Flemish Municipalities
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The level of revenues pocketed by a government during the fiscal
year often deviates from that projected by this government in its
budget. Despite a flourishing literature on, for example, the
technical or procedural determinants of such forecast errors, little
is yet known about how political stratagems may affect forecast
errors. In the present paper, we analyse whether differences in the
level of government fragmentation are useful in explaining local
government tax revenue forecast errors – controlling for various
other factors. Using data on 242 Flemish municipalities for the
period 1992-2002, we find that two-party governments are more
optimistic than single-party governments. In contrast to our initial
expectations, governments with at least three parties are
significantly more careful (or less optimistic) in their revenue
projections than single- or two-party governments. |
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