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

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  • Chamon, Marcos
  • Mello, João Manoel Pinho de
  • Firpo, Sergio Pinheiro

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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  • Chamon, Marcos & Mello, João Manoel Pinho de & Firpo, Sergio Pinheiro, 2010. "Electoral rules, political competition and fiscal spending: regression discontinuity evidence from brazilian municipalities," Textos para discussão 208, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
  • Handle: RePEc:fgv:eesptd:208
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    Cited by:

    1. 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.
    2. Barone, Guglielmo & de Blasio, Guido, 2013. "Electoral rules and voter turnout," International Review of Law and Economics, Elsevier, vol. 36(C), pages 25-35.
    3. Sergio Firpo & Renan Pieri & André Portela Souza, 2017. "Electoral impacts of uncovering public school quality: Evidence from Brazilian municipalities," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 17(1), pages 1-17.
    4. 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.
    5. 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.
    6. Guido De Blasio & Guglielmo Barone, 2011. "Local electoral rules and political participation," ERSA conference papers ersa11p418, European Regional Science Association.
    7. 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].
    8. Bracco, Emanuele & Redoano, Michela & Porcelli, Francesco, 2012. "Incumbent Effects and Partisan Alignment in Local Elections: a Regression Discontinuity Analysis Using Italian Data," CAGE Online Working Paper Series 87, Competitive Advantage in the Global Economy (CAGE).
    9. Emanuele Bracco & Alberto Brugnoli, 2012. "Runoff vs. plurality," Working Papers 23767067, Lancaster University Management School, Economics Department.
    10. Florian Ade & Ronny Freier, 2011. "Divided Government versus Incumbency Externality Effect - Quasi-experimental Evidence on Multiple Voting Decisions," CESifo Working Paper Series 3683, CESifo.

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