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Electoral Incentives and the Allocation of Public Funds

Author

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  • Frederico Finan
  • Maurizio Mazzocco
Abstract
It is widely believed that politicians allocate public resources in ways to maximize political gains. But what is less clear is whether this comes at a cost to welfare; and if so, whether alternative electoral rules can help reduce these costs. In this paper, we address both of these questions by modeling and estimating politicians' decisions to allocate public funds. We use data from Brazil's federal legislature, which grants each federal legislator a budget to fund public projects in his state. We find that 26 percent of the public funds are distorted relative to a social planner's allocation. We then use the model to simulate several potential policies reforms to the electoral system, including adopting approval voting and implementing term limits. We find that an approval voting system reduces the distortions by 7.5 percent. Term limits also reduce distortions, but come at the cost of more corruption, which makes it a welfare-reducing policy.

Suggested Citation

  • Frederico Finan & Maurizio Mazzocco, 2016. "Electoral Incentives and the Allocation of Public Funds," NBER Working Papers 21859, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:21859
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    2. Potrafke, Niklas, 2019. "Electoral cycles in perceived corruption: International empirical evidence," Journal of Comparative Economics, Elsevier, vol. 47(1), pages 215-224.
    3. Federico Boffa & Francisco Cavalcanti & Christian Fons‐Rosen & Amedeo Piolatto, 2024. "Drought‐Reliefs and Partisanship," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 86(2), pages 187-208, April.
    4. Emilio Depetris-Chauvin & Felipe González, 2023. "The Political Consequences of Vaccines: Quasi-experimental Evidence from Eligibility Rules," Documentos de Trabajo 572, Instituto de Economia. Pontificia Universidad Católica de Chile..
    5. Mario F. Carillo, 2022. "Fascistville: Mussolini’s new towns and the persistence of neo-fascism," Journal of Economic Growth, Springer, vol. 27(4), pages 527-567, December.
    6. De Luca, Giacomo & Hodler, Roland & Raschky, Paul A. & Valsecchi, Michele, 2018. "Ethnic favoritism: An axiom of politics?," Journal of Development Economics, Elsevier, vol. 132(C), pages 115-129.
    7. James Habyarimana & Stuti Khemani & Thiago Scot, 2023. "The importance of political selection for bureaucratic effectiveness," Economica, London School of Economics and Political Science, vol. 90(359), pages 746-779, July.
    8. Pranab Bardhan & Sandip Mitra & Dilip Mookherjee & Anusha Nath, 2020. "How Do Voters Respond to Welfare vis-à-vis Public Good Programs? An Empirical Test for Clientelism," Staff Report 605, Federal Reserve Bank of Minneapolis.
    9. Thomas Husted & David Nickerson, 2022. "Governors and electoral hazard in the allocation of federal disaster aid," Southern Economic Journal, John Wiley & Sons, vol. 89(2), pages 522-539, October.
    10. , 2023. "The Political Consequences of Vaccines: Quasi-experimental Evidence from Eligibility Rules," Working Papers 953, Queen Mary University of London, School of Economics and Finance.
    11. Diogo Baerlocher & Rodrigo Schneider, 2021. "Cold bacon: co-partisan politics in Brazil," Public Choice, Springer, vol. 189(1), pages 161-182, October.
    12. Antonio Accetturo & Giuseppe Albanese & Alessio D'Ignazio, 2020. "A new phoenix? Large plants regeneration policies in Italy," Journal of Regional Science, Wiley Blackwell, vol. 60(5), pages 878-902, November.
    13. Maffioli, Elisa M., 2021. "The political economy of health epidemics: Evidence from the Ebola outbreak," Journal of Development Economics, Elsevier, vol. 151(C).
    14. Li, Xiang, 2022. "The role of state-owned banks in crises: Evidence from German banks during COVID-19," IWH Discussion Papers 6/2022, Halle Institute for Economic Research (IWH), revised 2022.
    15. Somdeep Chatterjee & Pushkar Maitra & Manhar Manchanda, 2024. "The Relevant Third: Threat of Coalition and Economic Development," Monash Economics Working Papers 2024-13, Monash University, Department of Economics.
    16. Marcel Henkel, Eunjee Kwon, Pierre Magontier, 2022. "The Unintended Consequences of Post-Disaster Policies for Spatial Sorting," Diskussionsschriften credresearchpaper37, Universitaet Bern, Departement Volkswirtschaft - CRED.
    17. Mansuri, Ghazala & Palaniswamy, Nethra & Rao, Vijayendra & Shrestha, Slesh A., 2023. "Money versus Kudos: The impact of incentivizing local politicians in India," Journal of Public Economics, Elsevier, vol. 224(C).
    18. Kaba, Mustafa, 2022. "Who buys vote-buying? How, how much, and at what cost?," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 98-124.

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    More about this item

    JEL classification:

    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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