WORKING PAPER

358.

Tying Your Enemy’s Hands in Close Races: The Politics of Federal Transfers in Brazil
By Fernanda Brollo and Tommaso Nannicini

We apply a regression discontinuity design in close electoral races to identify the effect of political alignment on federal transfers to municipal governments in Brazil. We find that municipalities where the mayor is affiliated with the coalition of the President—in the last two years of the mayoral term—receive larger (discretionary) infrastructure transfers by about one-third. This effect is mainly driven by the fact that the federal government penalizes municipalities run by mayors from the opposition coalition who won by a narrow margin, thereby tying their hands for the next election. Politically motivated transfers are larger for first-term mayors, who have higher reelection incentives; for mayors unaligned with the state governor, who may have a hard time obtaining state transfers; and in small towns without a radio station, where the influence of mayors on local politics is stronger.

JEL codes: C21, D72, H77.
Keywords: intergovernmental grants, political alignment, regression discontinuity.

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