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Are rules-based government programs shielded from special-interest politics? Evidence from revenue-sharing transfers in Brazil

  • Stephan Litschig

Manipulation of government finances for the benefit of narrowly defined groups is usually thought to be limited to the part of the budget over which politicians exercise discretion in the short run, such as earmarks. Analyzing a revenue-sharing program between the central and local governments in Brazil that uses an allocation formula based on local population estimates, I document two main results: first, that the population estimates entering the formula were manipulated and second, that this manipulation was political in nature. Consistent with swing-voter targeting by the right-wing central government, I find that municipalities with roughly equal right-wing and non-right-wing vote shares benefited relative to opposition or conservative core support municipalities. These findings suggest that the exclusive focus on discretionary transfers in the extant empirical literature on special-interest politics may understate the true scope of tactical redistribution that is going on under programmatic disguise.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/1144.pdf
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1144.

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Date of creation: Aug 2008
Date of revision: May 2012
Handle: RePEc:upf:upfgen:1144
Contact details of provider: Web page: http://www.econ.upf.edu/

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