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Electoral Accountability and Corruption in Local Governments: Evidence from Audit Reports

  • Ferraz, Claudio

    ()

    (Pontifical Catholic University of Rio de Janeiro (PUC-Rio))

  • Finan, Frederico S.

    ()

    (University of California, Berkeley)

Political corruption is a concern of many modern democracies. It weakens democratic institutions, restricts public services, and lowers productivity undermining economic development. Yet despite its importance, our understanding of what determines corruption is limited. This paper uses a novel dataset of political corruption in local governments, constructed from reports of an anti-corruption program in Brazil, to test whether the possibility of re-election affects the level of rents extracted by incumbent politicians. Exploiting variation induced by the existence of a term limit, we find that in municipalities where mayors are in their final term, there is significantly more corruption compared to similar municipalities where mayors can still be re-elected. In particular, the share of resources misappropriated is, on average, 57 percent larger in municipalities with lame-duck mayors. The findings suggest that electoral rules that enhance political accountability play a crucial role in constraining politician’s corrupt behavior.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2843.

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Length: 48 pages
Date of creation: Jun 2007
Date of revision:
Publication status: published in: American Economic Review, 2011, 101 (4), 1274-1311
Handle: RePEc:iza:izadps:dp2843
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  9. Ferraz, Claudio & Finan, Frederico S., 2007. "Exposing Corrupt Politicians: The Effects of Brazil’s Publicly Released Audits on Electoral Outcomes," IZA Discussion Papers 2836, Institute for the Study of Labor (IZA).
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  23. Di Tella, Rafael & Schargrodsky, Ernesto, 2003. "The Role of Wages and Auditing during a Crackdown on Corruption in the City of Buenos Aires," Journal of Law and Economics, University of Chicago Press, vol. 46(1), pages 269-92, April.
  24. Ritva Reinikka & Jakob Svensson, 2004. "Local Capture: Evidence From a Central Government Transfer Program in Uganda," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 678-704, May.
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