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Party ideology and policies where corruption is widespread: evidence from local governments

The Point: This paper studies the effect of mayors aligned with a centre left presidential coalition on policy outcomes and corruption. I use Regression Discontinuity Design in Brazilian municipal elections for two mayoral terms, from 2001 to 2008.

Results indicate that municipalities aligned with the president’s coalition receives more transfers but are not more corrupt and allocate resources differently. Therefore, even in the context of institutional fragility and corruption, politician’s preferences about policies can be relevant in the provision of public services important to the reduction of inequality, such as education. The motivations and incentives of politicians are important issues because it helps to understand the redistributive consequences of government intervention.

The Questions Being Asked: Models that study the relationship between politicians motivations and government, often assume that politicians only care about winning the office to extract rents, whether monetary or self-esteem (Besley, 2006). These different incentives, both the ideological and self-interested, have been broadly analysed, but, can all of them be present in the same party system at the same time? Through which channels can interact it? The motivations and incentives of politicians are at the core of the political economy, and these are important questions because it helps to understand the welfare consequences of government intervention.

The Data: Data on electoral results is provided by the Brazil´s electoral authority (Tribunal Superior Electoral), and it is available on its website. The Brazil´s federal National Treasury (Tesouro Nacional) database Finbra provides information about municipality's finances for all the sample period except 2003. Data on corruption at the municipality level is available from Brollo et al. (2013). Data on local chacarteristics is provided by Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística, IBGE and the Brazilian Institute of Applied Economics Research (Instituto de Pesquisa Economica Aplicada).

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