FISCAL DYNAMICS OF LOCAL ELECTED OFFICIALS

The fiscal behavior of local elected officials is examined in a dynami c model where officials maximize an intertemporal objective function i n two stages. Officials first decide upon an optimal mix of revenue an d expenditure and then minimize loss and adjustment-cost functions. Th e model is tested using data from the 20 most populated U.S. cities wh ose mayor was elected on a four-year cycle. The empirical results supp ort the model. Fiscal behavior differs between cities and local fiscal decisions made by elected officials are in part dependent on the timi ng of elections.