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Are rules-based government programs shielded from special-interest politics? Evidence from revenue-sharing transfers in Brazil

  • Litschig, Stephan
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    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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    Article provided by Elsevier in its journal Journal of Public Economics.

    Volume (Year): 96 (2012)
    Issue (Month): 11 ()
    Pages: 1047-1060

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    Handle: RePEc:eee:pubeco:v:96:y:2012:i:11:p:1047-1060
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    1. Albert Solé-Ollé & Pilar Sorribas-Navarro, 2006. "The effects of partisan alignment on the allocation of intergovernmental transfers. Differences-in-differences estimates for Spain," Working Papers 2006-09, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
    2. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
    3. Wiji Arulampalam & Sugato Dasgupta & Amrita Dhillon & Bhaskar Dutta, 2008. "Electoral goals and center-state transfers: A Theoretical model and empirical evidence from India," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 08-14, Indian Statistical Institute, New Delhi, India.
    4. Adriana Camacho & Emily Conover, 2009. "Manipulation of Social Program Eligibility: Detection, Explanations and Consequences for Empirical Research," DOCUMENTOS CEDE 006211, UNIVERSIDAD DE LOS ANDES-CEDE.
    5. Anne Case, 1997. "Election Goals and Income Redistribution: Recent Evidence From Albania," Working Papers 227, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
    6. Stephen Ansolabehere & James M. Snyder, 2006. "Party Control of State Government and the Distribution of Public Expenditures," Scandinavian Journal of Economics, 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, vol. 82(2), pages 464-484, March.
    8. 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.
    9. Robin Boadway & Anwar Shah, 2007. "Intergovernmental Fiscal Transfers : Principles and Practice," World Bank Publications, The World Bank, number 7171, September.
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