Working Paper: CEPR ID: DP7672
Authors: Fernanda Brollo; Tommaso Nannicini; Roberto Perotti; Guido Tabellini
Abstract: The paper studies the effect of additional government revenues on political corruption and on the quality of politicians, both with theory and data. The theory is based on a version of the career concerns model of political agency with endogenous entry of political candidates. The evidence refers to municipalities in Brazil, where federal transfers to municipal governments change exogenously according to given population thresholds. We exploit a regression discontinuity design to test the implications of the theory and identify the causal effect of larger federal transfers on political corruption and the observed features of political candidates at the municipal level. In accordance with the predictions of the theory, we find that larger transfers increase political corruption and reduce the quality of candidates for mayor.
Keywords: corruption; government spending; political selection
JEL Codes: D72; D73; H40; H77
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Federal transfers (H77) | Corruption (D73) |
| Federal transfers (H77) | Quality of political candidates (D79) |
| Federal transfers (H77) | Incumbent mayor's probability of reelection (D79) |