American Economic Review: Vol. 103 No. 5 (August 2013)


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The Political Resource Curse

Article Citation

Brollo, Fernanda, Tommaso Nannicini, Roberto Perotti, and Guido Tabellini. 2013. "The Political Resource Curse." American Economic Review, 103(5): 1759-96.

DOI: 10.1257/aer.103.5.1759


This 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 political agency model with career concerns and endogenous entry of candidates. The data refer to Brazil, where federal transfers to municipal governments change exogenously at given population thresholds, allowing us to implement a regression discontinuity design. The empirical evidence shows that larger transfers increase observed corruption and reduce the average education of candidates for mayor. These and other more specific empirical results are in line with the predictions of the theory.

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Brollo, Fernanda (U Alicante)
Nannicini, Tommaso (Bocconi U)
Perotti, Roberto (Bocconi U)
Tabellini, Guido (Bocconi U)

JEL Classifications

D72: Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
D73: Bureaucracy; Administrative Processes in Public Organizations; Corruption
H77: Intergovernmental Relations; Federalism; Secession
O17: Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
O18: Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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