nep-pol New Economics Papers
on Positive Political Economics
Issue of 2010‒07‒03
three papers chosen by
Eugene Beaulieu
University of Calgary

  1. Electoral Rules, Political Competition And Fiscal Spending:Regression Discontinuity Evidence From Brazilian Municipalities By Chamon, Marcos; M. P. De Mello, João; Firpo, Sergio
  2. Political capture of decentralization : vote-buying through grants-financed local jurisdictions By Khemani, Stuti
  3. Hybrid Political Institutions And Governability:The Budgetary Process In Brazil By Pereira, Carlos; Orellana, Salomon

  1. By: Chamon, Marcos; M. P. De Mello, João; Firpo, Sergio
    Abstract: We exploit a discontinuity in Brazilian municipal election rules to investigate whetherpolitical competition has a causal impact on policy choices. In municipalities with less than200,000 voters mayors are elected with a plurality of the vote. In municipalities with morethan 200,000 voters a run-off election takes place among the top two candidates if neitherachieves a majority of the votes. At a first stage, we show that the possibility of runoffincreases political competition. At a second stage, we use the discontinuity as a source ofexogenous variation to infer causality from political competition to fiscal policy. Our secondstage results suggest that political competition induces more investment and less currentspending, particularly personnel expenses. Furthermore, the impact of political competition islarger when incumbents can run for reelection, suggesting incentives matter insofar asincumbents can themselves remain in office.
    Date: 2010–06–16
  2. By: Khemani, Stuti
    Abstract: A recent trend in decentralization in several large and diverse countries is the creation of local jurisdictions below the regional level -- municipalities, towns, and villages -- whose spending is almost exclusively financed by grants from both regional and national governments. This paper argues that such grants-financed decentralization enables politicians to target benefits to pivotal voters and organized interest groups in exchange for political support. Decentralization, in this model, is subject to political capture, facilitating vote-buying, patronage, or pork-barrel projects, at the expense of effective provision of broad public goods. There is anecdotal evidence on local politics in several large countries that is consistent with this theory. The paper explores its implications for international development programs in support of decentralization.
    Keywords: Subnational Economic Development,Public Sector Economics,National Governance,Parliamentary Government,Banks&Banking Reform
    Date: 2010–06–01
  3. By: Pereira, Carlos; Orellana, Salomon
    Abstract: In this paper we take a close look at some of the particular pathways by whichmajoritarian and consensual institutions affect governability. We demonstrate that the mixof majoritarian and consensual institutions found within a country can influence thesepathways quite dramatically, such that they produce rather different consequences forgovernability, even when these pathways are relatively similar in nature. Particularly, wefocus on the rules governing the relationship between the President and the Legislature,especially the appropriation of amendments proposed by legislators. In some presidentialcountries, the president possesses a partial veto (or a line-item veto) which allows him/herto approve or strike appropriations, which legislators introduce in amendments.Concentrating on the case of Brazil, we argue and demonstrate that whether or not thepresident can use this tool to sustain governing majorities (i.e., to increase governability)depends on the kind of amendment introduced by legislators. One kind, individualamendment, is linked to the majoritarian institution of a powerful presidency and thereforehelps to increase governability. A second kind, collective amendment, is linked toconsensual institutions and actually does not enhance legislative support for the Executive.
    Date: 2010–06–16

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