www.voxeu.org/article/political-resource-curse , March 2010
www.nber.org/papers/w15705 , 2010
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.
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When local governments receive more money corruption increases, politicians' quality falls and the incumbents are more likely to be reelected, Brollo, Nannicini, Perotti e Tabellini find in a NBER paper
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We are used to local governments calling for money from the centre and developing countries calling for money from rich ones, but among the side-effects of windfall revenues there are a rise in corruption, a worsening quality of political candidates and a higher probability of reelection for the incumbents, even when they "grab more rents" -- academic jargon for stealing money.
Four economists from Università Bocconi, Fernanda Brollo, Tommaso Nannicini, Roberto Perotti and Guido Tabellini in The Political Resource Curse (NBER Working Paper No. 15705), using three Brazilian datasets, find that "a 10% increase in the federal transfers to municipal governments raises local corruption by 17% (broad definition, possibly including bad administration) or by 24% (narrow definition, with only severe violation episodes). Moreover, this fiscal windfall increases the incumbent's mayor probability of reelection by 7% and shrinks the fraction of his opponents with a college degree by 7%".