Electoral Accountability and Corruption in Local Governments: Evidence from Audit Reports

48 Pages Posted: 5 Jul 2007

See all articles by Claudio Ferraz

Claudio Ferraz

University of California, Berkeley - Department of Agricultural & Resource Economics; Institute of Applied Economic Research (IPEA)

Frederico Finan

University of California, Berkeley - Department of Economics; IZA Institute of Labor Economics

Date Written: June 2007

Abstract

Political corruption is a concern of many modern democracies. It weakens democratic institutions, restricts public services, and lowers productivity undermining economic development. Yet despite its importance, our understanding of what determines corruption is limited. This paper uses a novel dataset of political corruption in local governments, constructed from reports of an anti-corruption program in Brazil, to test whether the possibility of re-election affects the level of rents extracted by incumbent politicians. Exploiting variation induced by the existence of a term limit, we find that in municipalities where mayors are in their final term, there is significantly more corruption compared to similar municipalities where mayors can still be re-elected. In particular, the share of resources misappropriated is, on average, 57 percent larger in municipalities with lame-duck mayors. The findings suggest that electoral rules that enhance political accountability play a crucial role in constraining politician's corrupt behavior.

Keywords: accountability, corruption, local governments, re-election

JEL Classification: D72, D78, H41, O17

Suggested Citation

Ferraz, Claudio and Finan, Frederico, Electoral Accountability and Corruption in Local Governments: Evidence from Audit Reports (June 2007). IZA Discussion Paper No. 2843, Available at SSRN: https://ssrn.com/abstract=998235

Claudio Ferraz

University of California, Berkeley - Department of Agricultural & Resource Economics ( email )

Berkeley, CA 94720
United States

Institute of Applied Economic Research (IPEA) ( email )

Av. Presidente Antonio Carlos 51
16 andar, Castelo
RJ 20020-010 Rio de Janeiro
Brazil
+55 21 3804-8000 (Phone)
+55 21 2240-1920 (Fax)

Frederico Finan (Contact Author)

University of California, Berkeley - Department of Economics ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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