Reputation Shocks and Strategic Political Responses

Abstract

Information affecting a candidate’s reputation might have significant consequences for elections and policy making. How does this information affect candidates’ behavior? Using Brazilian elections and audits as an exogenous source of information, I show that politicians respond to information by adapting political campaigns and public policy. Both incumbent and challenger increase their campaign spending when detrimental information affects the incumbent’s reputation. Conversely, beneficial information decreases candidates’ spending. As information affects the expected competitiveness of elections, candidates adapt their spending accordingly. Yet, only information disclosed before electoral campaigns impacts spending. Furthermore, incumbents also adapt a conditional cash transfers program by increasing (decreasing) the beneficiaries when detrimental (beneficial) reputation shocks occur. The results shed light on how and when politicians react to information and uncover a negative side of campaign spending, that can be used to counterbalance information about corruption.

Keywords: Information, Politicians, Electoral campaigns, Corruption, Patronage