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

Author

Listed:
  • Chamon, Marcos

    () (International Monetary Fund)

  • de Mello, João M. P.

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

  • Firpo, Sergio

    () (Insper, São Paulo)

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 runoff election takes place among the top two candidates if neither achieves a majority of the votes. We show that the possibility of runoff increases political competition. We use the discontinuity as a source of exogenous variation to infer causality from political competition to fiscal policy. Our results suggest that political competition induces more investment and less current expenditures, particularly personnel expenditures. The impact of political competition is larger when incumbents can run for reelection, suggesting incentives matter insofar as incumbents can themselves remain in office.

Suggested Citation

  • Chamon, Marcos & de Mello, João M. P. & Firpo, Sergio, 2009. "Electoral Rules, Political Competition and Fiscal Expenditures: Regression Discontinuity Evidence from Brazilian Municipalities," IZA Discussion Papers 4658, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4658
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    References listed on IDEAS

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    Citations

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    Cited by:

    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. 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).
    3. Man, Georg, 2014. "Political competition and economic growth: A nonlinear relationship?," European Journal of Political Economy, Elsevier, vol. 36(C), pages 287-302.
    4. 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 42ndd Brazilian Economics Meeting] 064, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    5. Massimo Bordignon & Tommaso Nannicini & Guido Tabellini, 2016. "Moderating Political Extremism: Single Round versus Runoff Elections under Plurality Rule," American Economic Review, American Economic Association, pages 2349-2370.
    6. 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).

    More about this item

    Keywords

    electoral systems; political competition; regression discontinuity; fiscal expenditures;

    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 - Economic Systems - - Capitalist Systems

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