Accountability and yardstick competition in the public provision of education

This paper explores the institutional change introduced by the public disclosure of an education development index (IDEB, Basic Education Development Index) in 2007 to identify the effect of education accountability on yardstick competition in education spending for Brazilian municipalities. Our results are threefold. First, political incentives are pervasive in setting the education expenditures. The spatial strategic behavior on education spending is estimated lower for lame-ducks and for those incumbents with majority support at the city council. This suggests a strong relation between commitment and accountability which reinforces yardstick competition theory. Second, we find a minor reduction (20%) in spatial interaction for public education spending after IDEB's disclosure — compared to the spatial correlation before the disclosure of the index. This suggests that public release of information may decrease the importance of the neighbors' counterpart information on voter's decision. Third, exploring the discontinuity of IDEB's disclosure rule around the cut-off of 30 students enrolled in the grade under assessment, our estimates suggest that the spatial autocorrelation — and hence yardstick competition — is reduced in 54%. Finally, an unforeseen result suggests that the disclosure of IDEB increases expenditures, more than 100% according to our estimates.