Estache, Antonio Garsous, Grégoire da Motta, Ronaldo Serôa
Year of Publication:
IDB Working Paper Series No. IDB-WP-593
This paper investigates the effects of political (mis)alignment on public service delivery when mandates are shared between state and local governments. We analyze sewage treatment policies in the state of São Paulo, Brazil. Relying on difference-in-differences estimations, we establish a causal relationship between political alignment and higher sewage treatment provision. Conceptually, we find that, with uncertain local commitment and weakly enforceable local obligations, shared mandates lead to a moral hazard issue implying service under-provision. Our results show that political alignment attenuates such moral hazard effects.
political alignment infrastructure provision water and sanitary services moral hazard Brazil