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Electoral Incentives and the Allocation of Public Funds

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  • Frederico Finan
  • Maurizio Mazzocco

Abstract

Politicians allocate public resources in ways that maximize political gains, and potentially at the cost of lower welfare. In this paper, we quantify these welfare costs in the context of Brazil’s federal legislature, which grants its members a budget to fund public projects within their states. Using data from the state of Roraima, we estimate a model of politicians’ allocation decisions and find that 26.8% of the public funds allocated by legislators are distorted relative to a social planner’s allocation. We then use the model to simulate three potential policy reforms to the electoral system: the adoption of approval voting, imposing a one-term limit, and redistricting. We find that a one-term limit and redistricting are both effective at reducing distortions. The one-term limit policy, however, increases corruption, which makes it a welfare-reducing policy.

Suggested Citation

  • Frederico Finan & Maurizio Mazzocco, 2021. "Electoral Incentives and the Allocation of Public Funds," Journal of the European Economic Association, European Economic Association, vol. 19(5), pages 2467-2512.
    • Handle: RePEc:oup:jeurec:v:19:y:2021:i:5:p:2467-2512.
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    File URL: http://hdl.handle.net/10.1093/jeea/jvaa055
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    Cited by:

    1. Garance Genicot & Laurent Bouton & Micael Castanheira, 2021. "Electoral Systems and Inequalities in Government Interventions [“Distributive Politics and Electoral Incentives: Evidence from Seven US State Legislatures.”]," Journal of the European Economic Association, European Economic Association, vol. 19(6), pages 3154-3206.
    2. Fredriksson, Anders & Macchione Saes, Maria Sylvia, 2025. "Quantifying political effects in the spatial allocation of public services," Socio-Economic Planning Sciences, Elsevier, vol. 99(C).
    3. Federico Boffa & Francisco Cavalcanti & Christian Fons‐Rosen & Amedeo Piolatto, 2024. "Drought‐Reliefs and Partisanship," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 86(2), pages 187-208, April.
    4. Emilio Depetris-Chauvin & Felipe González, 2023. "The Political Consequences of Vaccines: Quasi-experimental Evidence from Eligibility Rules," Documentos de Trabajo 572, Instituto de Economia. Pontificia Universidad Católica de Chile..
    5. Mario F. Carillo, 2022. "Fascistville: Mussolini’s new towns and the persistence of neo-fascism," Journal of Economic Growth, Springer, vol. 27(4), pages 527-567, December.
    6. De Luca, Giacomo & Hodler, Roland & Raschky, Paul A. & Valsecchi, Michele, 2018. "Ethnic favoritism: An axiom of politics?," Journal of Development Economics, Elsevier, vol. 132(C), pages 115-129.
    7. James Habyarimana & Stuti Khemani & Thiago Scot, 2023. "The importance of political selection for bureaucratic effectiveness," Economica, London School of Economics and Political Science, vol. 90(359), pages 746-779, July.
    8. Bryce Morsky, 2025. "How urban scaling and resource distribution shape social welfare and migration dynamics," Papers 2506.03384, arXiv.org.
    9. Pranab Bardhan & Sandip Mitra & Dilip Mookherjee & Anusha Nath, 2020. "How Do Voters Respond to Welfare vis-à-vis Public Good Programs? An Empirical Test for Clientelism," Staff Report 605, Federal Reserve Bank of Minneapolis.
    10. Thomas Husted & David Nickerson, 2022. "Governors and electoral hazard in the allocation of federal disaster aid," Southern Economic Journal, John Wiley & Sons, vol. 89(2), pages 522-539, October.
    11. Kalliyil, Muneer & Sahoo, Soham, 2026. "The political economy of privatization of education: Role of local politicians in India," Journal of Economic Behavior & Organization, Elsevier, vol. 241(C).
    12. , 2023. "The Political Consequences of Vaccines: Quasi-experimental Evidence from Eligibility Rules," Working Papers 953, Queen Mary University of London, School of Economics and Finance.
    13. Arora,Abhishek & George,Siddharth & Rao,Vijayendra & Sharan,MR, 2023. "The Added Value of Local Democracy: Evidence from a Natural Experiment in India," Policy Research Working Paper Series 10555, The World Bank.
    14. Diogo Baerlocher & Rodrigo Schneider, 2021. "Cold bacon: co-partisan politics in Brazil," Public Choice, Springer, vol. 189(1), pages 161-182, October.
    15. Antonio Accetturo & Giuseppe Albanese & Alessio D'Ignazio, 2020. "A new phoenix? Large plants regeneration policies in Italy," Journal of Regional Science, Wiley Blackwell, vol. 60(5), pages 878-902, November.
    16. Potrafke, Niklas, 2019. "Electoral cycles in perceived corruption: International empirical evidence," Journal of Comparative Economics, Elsevier, vol. 47(1), pages 215-224.
    17. Maffioli, Elisa M., 2021. "The political economy of health epidemics: Evidence from the Ebola outbreak," Journal of Development Economics, Elsevier, vol. 151(C).
    18. Gonzalez, Felipe & Prem, Mounu, 2025. "Government Support in Times of Crisis: Transfers and the Road to Socialism," OSF Preprints vnz6d_v1, Center for Open Science.
    19. Li, Xiang, 2022. "The role of state-owned banks in crises: Evidence from German banks during COVID-19," IWH Discussion Papers 6/2022, Halle Institute for Economic Research (IWH), revised 2022.
    20. Somdeep Chatterjee & Pushkar Maitra & Manhar Manchanda, 2024. "The Relevant Third: Threat of Coalition and Economic Development," Monash Economics Working Papers 2024-13, Monash University, Department of Economics.
    21. Marcel Henkel, Eunjee Kwon, Pierre Magontier, 2022. "The Unintended Consequences of Post-Disaster Policies for Spatial Sorting," Diskussionsschriften credresearchpaper37, Universitaet Bern, Departement Volkswirtschaft - CRED.
    22. Mansuri, Ghazala & Palaniswamy, Nethra & Rao, Vijayendra & Shrestha, Slesh A., 2023. "Money versus Kudos: The impact of incentivizing local politicians in India," Journal of Public Economics, Elsevier, vol. 224(C).
    23. Pranab Bardhan & Sandip Mitra & Dilip Mookherjee & Anusha Nath, 2024. "How do voters respond to welfare vis‐à‐vis public good programs? Theory and evidence of political clientelism," Quantitative Economics, Econometric Society, vol. 15(3), pages 655-697, July.
    24. Kaba, Mustafa, 2022. "Who buys vote-buying? How, how much, and at what cost?," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 98-124.

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    JEL classification:

    • H40 - Public Economics - - Publicly Provided Goods - - - General

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