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

Abstract

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

Political competition, electoral participation and local fiscal performance

“…Most studies use variables that consider the electoral outcome, like the number of parties that form the government (Roubini and Sachs 1989;Schaltegger and Feld 2009), the excess number of seats above the amount that is necessary for majority (Volkerink and de Haan 2001), the Herfindahl-Hirschman Index of seat concentration (Rattso and Tovmo 2002;Hagen and Vabo 2005;Borge, Falch, and Tovmo 2008), the percentage of votes that a governor/party receives (Remmer and Wibbels 2000;Gosh 2010), the margin of victory (Cleary 2007;Boulding and Brown 2014), the volatility of vote shares over time (Ashworth et al 2014), or the alternation of parties in office (Rumi 2009). However, some studies also use variables that consider competition during the election process, like the number of parties contesting the election (Ashworth et al 2014) or the number of effective candidates (Arvate 2013;Chamon et al 2019). More unusual proxies employed are composite indices (Holbrook and van Dunk, 1993), the Polity IV index (Aidt and Eterovic 2011) -which is designed to measure democratic vs. autocratic country regimes-and the probability that two randomly picked parliamentary representatives will be of the same party (Yogo and Ngo Njib 2018).…”

“…Some results reveal a positive impact of voter turnout and political competition on local fiscal performance (e.g. Besley and Preston 2002;Ashworth et al 2014;Chamon et al 2019), some studies do not find a robust statistically significant relationship (e.g. Rattso and Tovmo 2002;Rodriguez Bolivar et al 2018;Suzuki and Han 2019) and others discover a negative impact (e.g.…”

Race, resources, and representation: Evidence from Brazilian politicians

“…We use the three measures mentioned in the text in our main analyses and we present a few additional descriptive analyses about the two remaining measures in the Appendix Figures B.1 and B.2. 19 Respondents also answered questions at the end of the survey about their own racial and other attributes. .…”

Political Competition and Local Government Performance: Evidence from Indonesia

“…Other studies have also considered the impact of political competition on policy choices and economic performance in developing countries, for exampleBrazil (De Janvry et al, 2012;Chamon et al, 2018),(Yogo and Ngo Njib, 2018), India(Crost and Kambhampati, 2010;Nath, 2014), MaliGottlieb and Kosec (2017) and Mexico(Díaz-Cayeros et al, 2014).…”