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

35 Pages Posted: 28 Dec 2009

See all articles by Marcos Chamon

Marcos Chamon

International Monetary Fund (IMF) - Research Department

Joao De Mello

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

Sergio Firpo

Insper

Date Written: December 2009

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.

Keywords: electoral systems, political competition, regression discontinuity, fiscal expenditures

JEL Classification: H72, D72, C14, P1

Suggested Citation

Chamon, Marcos and De Mello, Joao M. P. and Firpo, Sergio, Electoral Rules, Political Competition and Fiscal Expenditures: Regression Discontinuity Evidence from Brazilian Municipalities (December 2009). IZA Discussion Paper No. 4658. Available at SSRN: https://ssrn.com/abstract=1528593

Marcos Chamon (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-5867 (Phone)

Joao M. P. De Mello

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics ( email )

Rua Marques de Sao Vicente, 225/206F
Rio de Janeiro, RJ 22453
Brazil

Sergio Firpo

Insper ( email )

R Quata 300
Sao Paulo, 04542-030
Brazil

HOME PAGE: http://https://sites.google.com/site/sergiopfirpo/

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