Electoral rules, political competition and fiscal spending: regression discontinuity evidence from Brazilian municipalities

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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 run-off election takes place among the top two candidates if neither achieves a majority of the votes. At a first stage, we show that the possibility of runoff increases political competition. At a second stage, we use the discontinuity as a source of exogenous variation to infer causality from political competition to fiscal policy. Our second stage results suggest that political competition induces more investment and less current spending, particularly personnel expenses. Furthermore, the impact of political competition is larger when incumbents can run for reelection, suggesting incentives matter insofar as incumbents can themselves remain in office.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Texto para discussão ; No. 559

Classification and Topics

• Classification: Wirtschaft ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior ; Semiparametric and Nonparametric Methods: General
• Subject: Electoral Systems ; Strategic Voting ; Political Competition ; Regression Discontinuity ; Fiscal Spending. JEL Codes: H72 ; Kommunale Finanzpolitik ; Neue politische Ökonomie ; Kommunalwahl ; Wahlsystem ; Schätzung ; Brasilien

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Chamon, Marcos ; de Mello, João M. P. ; Firpo, Sergio
• Event: Veröffentlichung
• (who): Pontifícia Universidade Católica do Rio de Janeiro (PUC-Rio), Departamento de Economia
• (where): Rio de Janeiro
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/176042