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Electoral rules, political competition and fiscal spending : regression discontinuity evidence from Brazilian municipalities

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Author Info

  • Marcos Chamon

    ()
    (International Monetary Fund)

  • João Manoel Pinho de Mello

    ()
    (Department of Economics PUC-Rio)

  • Sergio Firpo

    ()
    (Escola de Economia de São Paulo, FGV)

Abstract

We exploit a discontinuity in Brazilian municipal election rules to investigate whether political competition has a causal impact on policy choices. In municipalities with less than 200,000 voters mayors are elected with a plurality of the vote. In municipalities with more than 200,000 voters a run-off election takes place among the top two candidates if neither achieves a majority of the votes. At a first stage, we show that the possibility of runoff increases political competition. At a second stage, we use the discontinuity as a source of exogenous variation to infer causality from political competition to fiscal policy. Our second stage results suggest that political competition induces more investment and less current spending, particularly personnel expenses. Furthermore, the impact of political competition is larger when incumbents can run for reelection, suggesting incentives matter insofar as incumbents can themselves remain in office.

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Bibliographic Info

Paper provided by Department of Economics PUC-Rio (Brazil) in its series Textos para discussão with number 559.

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Length: 47p
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:rio:texdis:559

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Keywords: Electoral Systems; Strategic Voting; Political Competition; Regression Discontinuity; Fiscal Spending. JEL Codes: H72; D72; C14; P1;

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  1. Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, vol. 142(2), pages 615-635, February.
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  3. Wilbert van der Klaauw, 2002. "Estimating the Effect of Financial Aid Offers on College Enrollment: A Regression-Discontinuity Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1249-1287, November.
  4. Besley, Timothy & Persson, Torsten & Sturm, Daniel, 2006. "Political Competition and Economic Performance: Theory and Evidence from the United States," Discussion Papers in Economics 769, University of Munich, Department of Economics.
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  7. Roberto Perotti & Massimo V. Rostagno & Gian-Maria Milesi-Ferretti, 2001. "Electoral System and Public Spending," IMF Working Papers 01/22, International Monetary Fund.
  8. Filipe R. Campante & Davin Chor & Quoc-Anh Do, 2009. "Instability And The Incentives For Corruption," Economics and Politics, Wiley Blackwell, vol. 21(1), pages 42-92, 03.
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  11. 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).
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  13. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
  14. Lee, David S., 2008. "Randomized experiments from non-random selection in U.S. House elections," Journal of Econometrics, Elsevier, vol. 142(2), pages 675-697, February.
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  16. Timothy Besley & Anne Case, 1993. "Does Electoral Accountability Affect Economic Policy Choices? Evidence from Gubernatorial Term Limits," NBER Working Papers 4575, National Bureau of Economic Research, Inc.
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Cited by:
  1. Firpo, Sergio & Pieri, Renan & Portela Souza, André, 2012. "Electoral Impacts of Uncovering Public School Quality: Evidence from Brazilian Municipalities," IZA Discussion Papers 6524, Institute for the Study of Labor (IZA).
  2. Emanuele Bracco & Alberto Brugnoli, 2012. "Runoff vs. plurality," Working Papers 23767067, Lancaster University Management School, Economics Department.
  3. Guido De Blasio & Guglielmo Barone, 2011. "Local electoral rules and political participation," ERSA conference papers ersa11p418, European Regional Science Association.
  4. Florian Ade & Ronny Freier, 2011. "Divided Government versus Incumbency Externality Effect - Quasi-experimental Evidence on Multiple Voting Decisions," CESifo Working Paper Series 3683, CESifo Group Munich.

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