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

Marcos Chamon (), Joao De Mello and Sergio Firpo

No 4658, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 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.

Keywords: electoral systems; political competition; regression discontinuity; fiscal expenditures (search for similar items in EconPapers)
JEL-codes: C14 D72 H72 P1 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2009-12
New Economics Papers: this item is included in nep-cdm and nep-pol
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Citations: View citations in EconPapers (14)

Published - published in: Journal of Development Studies, 2019, 55 (1),19-38

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Journal Article: Electoral Rules, Political Competition and Fiscal Expenditures: Regression Discontinuity Evidence from Brazilian Municipalities (2019)
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