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The Influence of Political Cycles on Public Investments in Infrastructure: A Study of Brazilian States from 2003 to 2014

Abstract

This study aims to evaluate whether political cycles together with the government’s ideological bias have a significant impact on decision making regarding the allocation of public investments in infrastructure in the states of Brazil. This study uses information for Brazilian states for the period from 2003 and 2014 in order to cover three political cycles. It utilizes a fixed effects panel data regression which makes it possible to identify state characteristics that are unobserved and constant over time. The results show that the electoral cycle does exert an influence, if we consider that ideological differences are linked to electoral cycles. Left-wing and centrist parties tend to invest more in infrastructure in pre-election periods in comparison with right-wing parties. This result also contributes to the literature because it shows that cycles can be more influential depending on the party that is governing. A counter-intuitive result worth mentioning is the negative impact on infrastructure investment that occurs when the governor belongs to the same political party as the president. A positive impact had been expected.

Keywords:
political cycles; public investments; Brazilian states.

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