Occupy Government: Democracy and the Dynamics of Personnel Decisions and Public Finances

54 Pages Posted: 4 Feb 2019

See all articles by Klenio Barbosa

Klenio Barbosa

Sao Paulo School of Economics - FGV

Fernando V. Ferreira

University of Pennsylvania - The Wharton School

Date Written: January 2019

Abstract

We study the causes and consequences of patronage in Brazilian cities since the country’s re-democratization. We test key mechanisms – fiscal rules, accountability, political ideology, and rent-seeking – and estimate the consequences of patronage for public finances. Our data consist of the universe of public sector employees merged with their party affiliations, and a dynamic regression discontinuity design is applied to disentangle patronage from the growing political participation. The short-term patronage effect is large, with winning political coalitions increasing their shares of public sector workers and wages by 4 and 6 percentage points, respectively, during a mayoral term. Part of this effect lasts longer than a decade, with winning coalitions also occupying civil servant jobs that perform service-oriented tasks. This political occupation of government jobs is not associated with ideology, though. Instead, lack of accountability and rent-seeking are the primary driving forces, while reliance on intergovernmental transfers only increases patronage for smaller cities. Higher patronage does not affect the size of local governments, but it changes the composition of expenditures: hiring politically connected workers crowds out, almost one-to-one, non-affiliated employees. Overall, patronage accounted for more than half of the dramatic increase in public sector political employment since the Brazilian re-democratization.

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Suggested Citation

Barbosa, Klenio and Ferreira, Fernando V., Occupy Government: Democracy and the Dynamics of Personnel Decisions and Public Finances (January 2019). NBER Working Paper No. w25501, Available at SSRN: https://ssrn.com/abstract=3328324

Klenio Barbosa (Contact Author)

Sao Paulo School of Economics - FGV ( email )

Rua Itapeva, 474
Sao Paulo
Brazil

Fernando V. Ferreira

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-7181 (Phone)
215-573-2220 (Fax)

HOME PAGE: http://real.wharton.upenn.edu/~fferreir/

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