Partisan Voluntary Transfers in a Fiscal Federation: New evidence from Brazil

This article presents an empirical test to the hypothesis of partisan voluntary transfers in Brazil. That hypothesis postulates that municipalities receive significantly more transfers from the State (Federal) government if the mayor belongs to the governor's (president's) party, or to a coalition of parties that supported him in the electoral campaign. The econometric evidence strongly suggests that partisan transfers are broadly used in Brazil regardless of the ideological position or other characteristics of the party holding the presidency or the state government. Furthermore, we find evidence that there exists in Brazil a two-year long political budget cycle in transfers in spite of the four-year political terms for all executive positions. The Brazilian electoral calendar, which includes staggered elections every two years, could explain this short political cycle. The econometric study also point to a preponderance of the partisan motive at the higher level, i.e., from the President to the mayors, over the intermediate level (from State governors to the mayors). Moreover, there is some evidence that younger parties (founded in the 90s), medium size parties and right-wing parties do not use the partisan transfer mechanism as strongly as the older and more center to left parties. Finally, there seems to be some regional difference in such a way that richer states' governors use more the partisan mechanism than poorer ones. These results call for tighter regulation in order to redress the bias caused by partisan transfers, which could naturally be a responsibility of the National and Regional Electoral Courts in Brazil.