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Electoral Rules, Political Competition and Fiscal Expenditures: Regression Discontinuity Evidence from Brazilian Municipalities

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  • Marcos Chamon
  • Sergio Firpo
  • João M. P. de Mello
  • Renan Pieri

Abstract

We exploit a discontinuity in the rules of Brazilian mayoral elections to investigate whether political competition has a causal impact on fiscal policy choices. In municipalities with fewer than 200,000 voters, mayors are elected under a plurality voting system. In all other municipalities, a runoff election takes place between the top two candidates if neither achieves the majority of votes. Our results suggest that political competition induces more investment and less current expenditures, particularly personnel expenditures. The impact is larger when incumbents can run for re-election, suggesting incentives matter insofar as incumbents can themselves remain in office.

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  • Marcos Chamon & Sergio Firpo & João M. P. de Mello & Renan Pieri, 2019. "Electoral Rules, Political Competition and Fiscal Expenditures: Regression Discontinuity Evidence from Brazilian Municipalities," Journal of Development Studies, Taylor & Francis Journals, vol. 55(1), pages 19-38, January.
    • Handle: RePEc:taf:jdevst:v:55:y:2019:i:1:p:19-38
    DOI: 10.1080/00220388.2017.1414184
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    1. Stefano Gagliarducci & Tommaso Nannicini, 2013. "Do Better Paid Politicians Perform Better? Disentangling Incentives From Selection," Journal of the European Economic Association, European Economic Association, vol. 11(2), pages 369-398, April.
    2. Verdier, Thierry & Seror, Avner, 2018. "Multi-candidate Political Competition and the Industrial Organization of Politics," CEPR Discussion Papers 13121, C.E.P.R. Discussion Papers.
    3. Bordignon, Massimo & Nannicini, Tommaso & Tabellini, Guido, 2017. "Single round vs. runoff elections under plurality rule: A theoretical analysis," European Journal of Political Economy, Elsevier, vol. 49(C), pages 123-133.
    4. Cipullo, Davide, 2018. "Runoff vs. Plurality: Does It Matter for Expenditures? Evidence from Italy," Working Paper Series 2018:13, Uppsala University, Department of Economics.
    5. Massimo Bordignon & Guido Tabellini, 2009. "Moderating Political Extremism: Single Round vs Runoff Elections under Plurality Rule," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0087, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    6. Arvate, Paulo Roberto, 2013. "Electoral Competition and Local Government Responsiveness in Brazil," World Development, Elsevier, vol. 43(C), pages 67-83.
    7. Ade, Florian & Freier, Ronny, 2013. "Divided government versus incumbency externality effect—Quasi-experimental evidence on multiple voting decisions," European Economic Review, Elsevier, vol. 64(C), pages 1-20.
    8. Man, Georg, 2014. "Political competition and economic growth: A nonlinear relationship?," European Journal of Political Economy, Elsevier, vol. 36(C), pages 287-302.
    9. Perez-Vincent, Santiago M., 2023. "A few signatures matter: Barriers to entry in Italian local politics," European Journal of Political Economy, Elsevier, vol. 78(C).
    10. Hélène Laurent, 2021. "Corruption and politicians’ horizon," Economics of Governance, Springer, vol. 22(1), pages 65-91, March.
    11. Tobias Hiller, 2023. "Measuring the Difficulties in Forming a Coalition Government," Games, MDPI, vol. 14(2), pages 1-15, March.
    12. Massimo Bordignon & Tommaso Nannicini & Guido Tabellini, 2016. "Moderating Political Extremism: Single Round versus Runoff Elections under Plurality Rule," American Economic Review, American Economic Association, vol. 106(8), pages 2349-2370, August.
    13. Florian Ade & Ronny Freier, 2011. "Divided Government versus Incumbency Externality Effect - Quasi-experimental Evidence on Multiple Voting Decisions," CESifo Working Paper Series 3683, CESifo.
    14. Natália S. Bueno & Michael Noble & Thad Dunning, 2016. "Race, resources, and representation: Evidence from Brazilian politicians," WIDER Working Paper Series 144, World Institute for Development Economic Research (UNU-WIDER).
    15. Menezes, Aline, 2017. "Do some electoral systems select better politicians than others? Single- vs dual-ballot elections," MPRA Paper 79370, University Library of Munich, Germany.
    16. Jahen F. Rezki, 2022. "Political competition and economic performance: evidence from Indonesia," Economics of Governance, Springer, vol. 23(2), pages 83-114, June.
    17. Francisco Antonio Sousa De Araujo & Paulo De Melo Jorge Neto, 2016. "Competição Política, Grupos De Interesse E A Oferta De Serviços Públicos: Uma Análise Para Os Municípios Cearenses Nos Anos De 2005 E 2009," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42nd Brazilian Economics Meeting] 064, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    18. Chaudhry, Ahmed & Mazhar, Ummad, 2018. "Political competition and economic performance: Empirical evidence from Pakistan," Economics Discussion Papers 2018-27, Kiel Institute for the World Economy (IfW Kiel).
    19. Rezki, Jahen Fachrul, 2018. "Political Competition and Local Government Performance: Evidence from Indonesia," SocArXiv nekps, Center for Open Science.
    20. Danilo P. Souza & Marcos Y. Nakaguma, 2018. "Negative advertising and electoral rules: an empirical evaluation of the Brazilian case," Working Papers, Department of Economics 2018_10, University of São Paulo (FEA-USP).

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    More about this item

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • P1 - Political Economy and Comparative Economic Systems - - Capitalist Economies

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