Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/176042 
Year of Publication: 
2008
Series/Report no.: 
Texto para discussão No. 559
Publisher: 
Pontifícia Universidade Católica do Rio de Janeiro (PUC-Rio), Departamento de Economia, Rio de Janeiro
Abstract: 
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.
Subjects: 
Electoral Systems
Strategic Voting
Political Competition
Regression Discontinuity
Fiscal Spending. JEL Codes: H72
D72
C14
P1
Document Type: 
Working Paper

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