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American Economic Review: Vol. 101 No. 4 (June 2011)

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Electoral Accountability and Corruption: Evidence from the Audits of Local Governments

Article Citation

Ferraz, Claudio, and Frederico Finan. 2011. "Electoral Accountability and Corruption: Evidence from the Audits of Local Governments." American Economic Review, 101(4): 1274-1311.

DOI: 10.1257/aer.101.4.1274

Abstract

We show that political institutions affect corruption levels. We use audit reports in Brazil to construct new measures of political corruption in local governments and test whether electoral accountability affects the corruption practices of incumbent politicians. We find significantly less corruption in municipalities where mayors can get reelected. Mayors with reelection incentives misappropriate 27 percent fewer resources than mayors without reelection incentives. These effects are more pronounced among municipalities with less access to information and where the likelihood of judicial punishment is lower. Overall our findings suggest that electoral rules that enhance political accountability play a crucial role in constraining politician's corrupt behavior. (JEL D72, K42, O17)

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Authors

Ferraz, Claudio (Pontifical Catholic U Rio de Janeiro)
Finan, Frederico (U CA, Berkeley)

JEL Classifications

D72: Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
K42: Illegal Behavior and the Enforcement of Law
O17: Formal and Informal Sectors; Shadow Economy; Institutional Arrangements


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