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Are Rules-based Government Programs Shielded from Special-Interest Politics? Evidence from Revenue-Sharing Transfers in Brazil

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  • Stephan Litschig
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    Abstract

    Manipulation of government finances for the benefit of narrowly defined groups is usually thought to be limited to the part of the budget over which politicians exercise discretion in the short run, such as earmarks. Analyzing a revenue-sharing program between the central and local governments in Brazil that uses an allocation formula based on local population estimates, I document two main results: first, that the population estimates entering the formula were manipulated and second, that this manipulation was political in nature. Consistent with swing-voter targeting by the right-wing central government, I find that municipalities with roughly equal right-wing and non-right-wing vote shares benefited relative to opposition or conservative core support municipalities. These findings suggest that the exclusive focus on discretionary transfers in the extant empirical literature on special-interest politics may understate the true scope of tactical redistribution that is going on under programmatic disguise.

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    Bibliographic Info

    Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 483.

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    Date of creation: Jul 2010
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    Handle: RePEc:bge:wpaper:483

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    Keywords: Bureaucracy; institutions; redistributive politics; electoral competition;

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    1. Arulampalam, Wiji & Dasgupta, Sugato & Dhillon, Amrita & Dutta, Bhaskar, 2008. "Electoral Goals and Center-State Transfers: A Theoretical Model and Empirical Evidence from India," IZA Discussion Papers 3376, Institute for the Study of Labor (IZA).
    2. Solé-Ollé, Albert & Sorribas-Navarro, Pilar, 2008. "The effects of partisan alignment on the allocation of intergovernmental transfers. Differences-in-differences estimates for Spain," Journal of Public Economics, Elsevier, Elsevier, vol. 92(12), pages 2302-2319, December.
    3. Dahlberg, M. & Johansson, E., 1999. "On the Vote Purchasing Behavior of Incumbent Governments," Papers, Uppsala - Working Paper Series 1999:24, Uppsala - Working Paper Series.
    4. Wright, Gavin, 1974. "The Political Economy of New Deal Spending: An Econometric Analysis," The Review of Economics and Statistics, MIT Press, vol. 56(1), pages 30-38, February.
    5. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, Springer, vol. 52(3), pages 273-297, January.
    6. Stephen Ansolabehere & James M. Snyder, 2006. "Party Control of State Government and the Distribution of Public Expenditures," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 108(4), pages 547-569, December.
    7. Khemani, Stuti, 2007. "Does delegation of fiscal policy to an independent agency make a difference? Evidence from intergovernmental transfers in India," Journal of Development Economics, Elsevier, Elsevier, vol. 82(2), pages 464-484, March.
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