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Partisanship and local fiscal policy : evidence from Brazilian cities

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  • Raphael Gouvea

    (Institute for Applied Economic Research and Department of Economics, University of Massachusetts Amherst)

  • Daniele Girardi

    (Department of Economics, University of Massachusetts Amherst)

Abstract

We study the role of political parties in shaping local fiscal policy in the context of Brazilian cities in the 2004-2016 period. Using a regression-discontinuity design, we find no effect of left-wing mayors on the size of the city government nor on the allocation of spending across main budget categories (current spending, investment and personnel). We do find a modest, significant and robust positive effect on the share of social expenditures. The (close) election of a left-wing mayor tends to raise the share of social expenditures by around 0.6 percentage points in our preferred RD specification. We then explore possible mechanisms which could bring about substantial fiscal policy convergence between political parties in Brazilian cities. We exploit oil-related revenue windfalls to explore the role of institutional constraints, and build an index of Tiebout competition to measure the role of the latter. We find support for the institutional constraints hypothesis in explaining the limited extent of spending allocation effects, and little support for the Tiebout-competition hypothesis.

Suggested Citation

  • Raphael Gouvea & Daniele Girardi, 2019. "Partisanship and local fiscal policy : evidence from Brazilian cities," UMASS Amherst Economics Working Papers 2019-06, University of Massachusetts Amherst, Department of Economics.
    • Handle: RePEc:ums:papers:2019-06
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    3. Bremer, Björn & Di Carlo, Donato & Wansleben, Leon, 2021. "The constrained politics of local public investments under cooperative federalism," MPIfG Discussion Paper 21/4, Max Planck Institute for the Study of Societies.
    4. Weilong Wang & Jianlong Wang & Shaersaikai Wulaer & Bing Chen & Xiaodong Yang, 2021. "The Effect of Innovative Entrepreneurial Vitality on Economic Resilience Based on a Spatial Perspective: Economic Policy Uncertainty as a Moderating Variable," Sustainability, MDPI, vol. 13(19), pages 1-23, September.

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    More about this item

    Keywords

    Partisanship; Local Fiscal Policy; Brazil; Regression-Discontinuity; Elections; Oil Windfalls; Tiebout Competition;
    All these keywords.

    JEL classification:

    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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