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Campaign donation and government contracts in Brazilian states

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  • Arvate, Paulo
  • Barbosa, Klenio de Souza
  • Fuzitani, Eric

Abstract

A corporate firm may influence policies in its favor by transferring money to political candidates. However, empirical studies which document evidence about the return on campaign donations are rare (Großer, Reuben and Tymula, 2013). In this paper we estimate the net expected return of a campaign donation in eight Brazilian states using a Regression Discontinuity Design (RDD) to separate the return of winning and losing state deputy candidates in the electoral coalition in 2006. Our results show that that the net return is quite high (i.e., the investment of donor firms is almost 2% of the net expected return), and is larger among traditional electoral parties than any other parties, on average. Looking at the heterogeneity of local executive and legislative levels, we find that net returns are higher when donor firms finance deputies within a governor’s electoral coalition than deputies outside this coalition.

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Bibliographic Info

Paper provided by Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil) in its series Textos para discussão with number 336.

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Date of creation: 06 Dec 2013
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Handle: RePEc:fgv:eesptd:336

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  1. Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, Elsevier, vol. 142(2), pages 615-635, February.
  2. Bronars, Stephen G & Lott, John R, Jr, 1997. "Do Campaign Donations Alter How a Politician Votes? Or, Do Donors Support Candidates Who Value the Same Things That They Do?," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 40(2), pages 317-50, October.
  3. Boubakri, Narjess & Guedhami, Omrane & Mishra, Dev & Saffar, Walid, 2012. "Political connections and the cost of equity capital," Journal of Corporate Finance, Elsevier, Elsevier, vol. 18(3), pages 541-559.
  4. McCrary, Justin, 2008. "Manipulation of the running variable in the regression discontinuity design: A density test," Journal of Econometrics, Elsevier, Elsevier, vol. 142(2), pages 698-714, February.
  5. Eitan Goldman & Jörg Rocholl & Jongil So, 2009. "Do Politically Connected Boards Affect Firm Value?," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 22(6), pages 2331-2360, June.
  6. Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. David S. Lee & David Card, 2006. "Regression Discontinuity Inference with Specification Error," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0322, National Bureau of Economic Research, Inc.
  8. Stephen Ansolabehere & John M. de Figueiredo & James M. Snyder Jr, 2003. "Why is There so Little Money in U.S. Politics?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 17(1), pages 105-130, Winter.
  9. Stephen Ansolabehere & John M. de Figueiredo & James M. Snyder, 2003. "Why Is There So Little Money in Politics?," NBER Working Papers 9409, National Bureau of Economic Research, Inc.
  10. Ferraz, Claudio & Finan, Frederico S., 2007. "Exposing Corrupt Politicians: The Effects of Brazil’s Publicly Released Audits on Electoral Outcomes," IZA Discussion Papers 2836, Institute for the Study of Labor (IZA).
  11. Mara Faccio, 2010. "Differences between Politically Connected and Nonconnected Firms: A Cross-Country Analysis," Financial Management, Financial Management Association International, Financial Management Association International, vol. 39(3), pages 905-928, 09.
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