Do voters reward politicians for education expenditures?

ASSUNÇÃO, MATHEUS; ESTEVAN, FERNANDA

doi:10.5935/0034-7140.20220002

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Brasil

Revista Brasileira de Economia

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Artigos • Rev. Bras. Econ. 76 (1) • Jan-Mar 2022 • https://doi.org/10.5935/0034-7140.20220002 copy

Do voters reward politicians for education expenditures?^* * We thank Mauricio Bugarin, Raphael Corbi, Thomas Fujiwara, Jason Garred, Ricardo Madeira, Enlinson Mattos, and Marcos Nakaguma for many helpful comments and the seminar participants at the Universities of Ottawa and Princeton. This study was financed by the Sao Paulo Research Foundation (FAPESP, grant #2015/21640-3, 2017/50134-4, and 2019/25033-5), British Academy, and the Newton Fund (Newton Advanced Fellowship, AF140079), and CNPq. This paper is part of Matheus' M.A. thesis at the Department of Economics at USP. Matheus received financial support from the Sao Paulo Research Foundation (FAPESP, grant # 2014/20307-6 and 2015/16095-6) and Coordenação de Aperfeiçoamento de Pessoal de Nível Superior-Brasil (CAPES, Finance Code 1). All remaining errors are ours.

Authorship SCIMAGO INSTITUTIONS RANKINGS

Abstract

Since education is publicly provided in most countries, the political system typically determines the level of education expenditures. Thus, it is essential to understand politicians' incentives to allocate resources to education. This paper provides causal evidence that voters reward politicians for educational expenditures by estimating the impact of a change in public education spending on mayors' reelection chances. To do so, we use an exogenous source of variation in education expenditures brought about by a federal reform, FUNDEF, in Brazil. We show that increases in education expenditures caused by FUNDEF led to a significant increase in the mayors' reelection chances. One percent increase in per capita education expenditures due to FUNDEF led to a 1.45 percent increase in mayors' reelection chances.

Keywords
political economy; education; voters

	Full sample (1)	Reduced sample (with tax data) (2)	Net recipients (with tax data) (3)
A. Political variables (2000)
Incumbent reelected	0.396	0.395	0.458
Incumbent party reelected	0.473	0.472	0.521
Incumbent coalition reelected	0.545	0.548	0.579
Incumbent running	0.680	0.665	0.737
Governor party	0.217	0.200	0.226
President party	0.148	0.145	0.163
B. Tax and transfer variables (1998–2000)
FUNDEF Net Transfers p.c. 1997	−12.96 (39.22)	−16.11 (39.45)	18.90 (14.71)
FUNDEF Net Transfers p.c.	−9.84 (82.65)	−14.52 (88.55)	23.28 (23.29)
Federal transfer p.c.	170.67 (110.39)	174.57 (113.99)	112.01 (51.70)
Tax revenue p.c.		20.11 (54.66)	24.38 (77.62)
State transfer p.c.		111.38 (142.09)	89.93 (166.00)
C. Municipal expenditures (1998–2000)
Education p.c.		158.54 (236.97)	134.44 (176.79)
Housing expenditure p.c.		44.41 (96.48)	37.03 (45.21)
Health and sanitation p.c.		79.55 (78.49)	68.47 (74.99)
Social security p.c.		32.82 (127.04)	24.72 (47.35)
Transportation p.c.		39.15 (58.93)	23.87 (37.73)
Industry and Trade p.c.		3.42 (11.41)	2.64 (6.52)
Agriculture p.c.		13.35 (22.22)	7.53 (13.30)
Defense and security p.c.		0.98 (4.81)	0.89 (5.55)
Energy p.c.		1.20 (3.91)	1.09 (3.79)
Regional development p.c.		0.51 (3.31)	0.48 (4.25)
Communications p.c.		1.02 (3.71)	0.54 (2.49)
Other p.c.		120.05 (288.14)	92.80 (188.13)
D. Demographic variables (2000)
Total population	31,418 (189,661)	34,821 (215,481)	64,230 (339,491)
Young population (%)	0.511	0.499	0.529
Elderly population (%)	0.095	0.097	0.087
Urban population (%)	0.588	0.599	0.599
Observations	5,221	4,002	1,471

Dep. Var.	Incumbent reelected
Dep. Var.	(1)	(2)	(3)	(4)	(5)	(6)	(7)
Net FUNDEF p.c. 1997	0.003*** (0.000)	0.002*** (0.000)	0.002*** (0.000)	0.003*** (0.000)	0.002*** (0.000)	0.002*** (0.000)	0.002*** (0.000)
Federal transfers p.c.	0.001 *** (0.000)	0.001 *** (0.000)	0.001 *** (0.000)	0.001 *** (0.000)	0.001 *** (0.000)	0.001 *** (0.000)	0.001 *** (0.000)
Young population (%)		0.620*** (0.204)	0.396* (0.228)		0.861 *** (0.230)	0.615** (0.275)	0.649** (0.247)
Elderly population (%)		0.441 (0.509)	0.280 (0.466)		0.415 (0.633)	0.145 (0.587)	0.165 (0.548)
Urban population (%)		−0.029 (0.044)	−0.084** (0.040)		−0.040 (0.055)	−0.110** (0.052)	−0.128** (0.052)
Governor party			0.181*** (0.022)			0.181*** (0.024)	0.180*** (0.023)
President party			0.179*** (0.040)			0.191*** (0.043)	0.191*** (0.043)
Tax revenue p.c.							0.001 *** (0.000)
State transfers p.c.							−0.000 (0.000)
Constant	0.282*** (0.018)	−0.043 (0.169)	0.066 (0.168)	0.283*** (0.018)	−0.141 (0.198)	0.002 (0.202)	−0.010 (0.185)
Observations	5,221	5,221	5,221	4,002	4,002	4,002	4,002

Dep. Var.	Education expenditures p.c. 1998–2000
	Full Sample			Net recipients			Net contributors
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)
Net FUNDEF p.c. 1997	0.390** (0.176)	0.609** (0.251)	−0.098 (0.425)	1.194** (0.436)	1.643*** (0.416)	0.568*** (0.153)	0.120 (0.204)	0.292 (0.360)	−0.287 (0.714)
Federal transfers p.c.	0.639*** (0.069)	0.755*** (0.070)	0.312** (0.127)	0.464*** (0.071)	0.564*** (0.134)	0.179 (0.247)	0.598*** (0.081)	0.708*** (0.073)	0.253 (0.202)
Tax revenue p.c.			0.518 (0.319)			0.220 (0.364)			2.031 (1.482)
State transfers p.c.			0.956** (0.392)			0.715** (0.299)			1.184** (0.556)
Demographic controls	No	Yes	Yes	No	Yes	Yes	No	Yes	Yes
Political controls	No	Yes	Yes	No	Yes	Yes	No	Yes	Yes
F-statistic	4.93	5.89	0.05	7.50	15.62	13.84	0.34	0.66	0.16
p-value	0.036	0.023	0.819	0.012	0.000	0.001	0.563	0.424	0.691
Observations	4,002	4,002	4,002	1,471	1,471	1,471	2,531	2,531	2,531

Dep.Var.	Incumbent reelected			Incumbent party reelected			Incumbent coalition reelected
Dep.Var.	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)
1. First-stage
Net FUNDEFp.c. 1997	1.194** (0.436)	1.643*** (0.416)	0.568*** (0.153)	1.194** (0.436)	1.643*** (0.416)	0.568*** (0.153)	1.194** (0.436)	1.643*** (0.416)	0.568*** (0.153)
F-statistic	7.50	15.62	13.84	7.50	15.62	13.84	7.50	15.62	13.84
p-value	0.012	0.000	0.001	0.012	0.000	0.001	0.012	0.000	0.001
II. Second-stage
Education expenditure p.c.	0.004** (0.002)	0.002** (0.001)	0.005** (0.002)	0.004** (0.002)	0.002** (0.001)	0.006*** (0.002)	0.004** (0.002)	0.002** (0.001)	0.005*** (0.002)
Federal transfers p.c.	−0.001 (0.001)	−0.001 (0.001)	−0.001 (0.001)	−0.001 (0.001)	−0.001 (0.001)	−0.001 (0.001)	−0.001 (0.001)	−0.001 (0.001)	−0.001 (0.001)
Tax revenue p.c.			−0.001 (0.002)			−0.001 (0.002)			−0.001 (0.002)
State transfers p.c.			−0.004 (0.003)			−0.004 (0.003)			−0.004 (0.002)
Demographic controls	No	Yes	Yes	No	Yes	Yes	No	Yes	Yes
Political controls	No	Yes	Yes	No	Yes	Yes	No	Yes	Yes
Observations	1,471	1,471	1,471	1,471	1,471	1,471	1,471	1,471	1,471

Dep.Var.	Other expenditures p.c. 1998–2000
Dep.Var.	Housing (1)	Health sanitation (2)	Social security (3)	Transport (4)	Industry & trade (5)	Agric. (6)	Defense & safety (7)	Energy (8)	Regional dvlp. (9)	Communic. (10)	Other (11)
Net FUNDEF p.c. 1997	−0.016 (0.060)	0.156 (0.136)	−0.070 (0.067)	−0.206** (0.079)	0.014 (0.019)	−0.006 (0.040)	0.041 (0.030)	−0.011 (0.014)	0.002 (0.006)	−0.002 (0.004)	−0.448 (0.278)
Federal transfers p.c.	0.189** (0.073)	0.077 (0.072)	0.015 (0.017)	0.092*** (0.028)	0.016*** (0.006)	0.072** (0.033)	0.001 (0.006)	−0.001 (0.004)	0.000 (0.002)	−0.000 (0.004)	0.157* (0.091)
Tax revenue p.c.	0.099* (0.055)	0.237** (0.093)	0.238*** (0.052)	0.135*** (0.042)	0.019*** (0.006)	−0.028 (0.028)	−0.015* (0.008)	0.026*** (0.003)	0.003 (0.005)	−0.005 (0.007)	1.273*** (0.180)
State transfers p.c.	0.141*** (0.038)	0.285*** (0.071)	0.174*** (0.029)	0.097*** (0.030)	−0.003 (0.002)	0.030 (0.019)	0.015 (0.011)	0.005 (0.003)	0.001 (0.003)	0.005 (0.005)	0.626*** (0.127)
Demographic controls	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Political controls	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Observations	1,471	1,471	1,471	1,471	1,471	1,471	1,471	1,471	1,471	1,471	1,471

Variables	Municipal taxes p.c. 1998–2000
Variables	Tax Revenue (1)	IPTU (2)	ISS (3)	ITBI (4)
Net FUNDEF p.c. 1997	0.226*** (0.078)	0.127** (0.059)	0.087* (0.046)	0.012 (0.010)
Federal transfers p.c.	−0.218** (0.089)	−0.051 (0.033)	−0.162*** (0.053)	−0.005 (0.005)
State transfers p.c.	0.309*** (0.110)	0.083** (0.036)	0.213*** (0.071)	0.013*** (0.004)
Demographic controls	Yes	Yes	Yes	Yes
Political controls	Yes	Yes	Yes	Yes
Observations	1,461	1,461	1,461	1,461

Dep.Var.	Incumbent party reelected
Dep.Var.	(1)	(2)	(3)	(4)	(5)	(6)	(7)
Net FUNDEF p.c. 1997	0.003*** (0.000)	0.002*** (0.000)	0.002*** (0.000)	0.003*** (0.001)	0.002*** (0.000)	0.002*** (0.000)	0.002*** (0.000)
Federal transfers p.c.	0.001 *** (0.000)	0.001 *** (0.000)	0.001 *** (0.000)	0.001 *** (0.000)	0.001 *** (0.000)	0.001 *** (0.000)	0.001 *** (0.000)
Young population (%)		0.591 ** (0.220)	0.442* (0.231)		0.775*** (0.213)	0.610** (0.233)	0.668*** (0.223)
Elderly population (%)		0.893* (0.518)	0.792 (0.501)		0.710 (0.563)	0.525 (0.538)	0.590 (0.526)
Urban population (%)		−0.094* (0.047)	−0.135*** (0.045)		−0.121** (0.054)	−0.172*** (0.053)	−0.190*** (0.053)
Governor party			0.114*** (0.018)			0.110*** (0.019)	0.109*** (0.019)
President party			0.149*** (0.031)			0.157*** (0.034)	0.156*** (0.034)
Tax revenue p.c.							0.001 *** (0.000)
State transfers p.c.							−0.000 (0.000)
Constant	0.325*** (0.016)	0.025 (0.179)	0.097 (0.175)	0.318*** (0.019)	−0.026 (0.182)	0.071 (0.177)	0.042 (0.172)
Observations	5,221	5,221	5,221	4,002	4,002	4,002	4,002

Dep.Var.	Incumbent coalition reelected
Dep.Var.	(1)	(2)	(3)	(4)	(5)	(6)	(7)
Net FUNDEF p.c. 1997	0.002*** (0.000)	0.001*** (0.000)	0.001*** (0.000)	0.003*** (0.000)	0.002*** (0.000)	0.002*** (0.000)	0.001*** (0.000)
Federal transfers p.c.	0.001*** (0.000)	0.001*** (0.000)	0.001*** (0.000)	0.001*** (0.000)	0.001*** (0.000)	0.001*** (0.000)	0.001*** (0.000)
Young population (%)		0.552** (0.199)	0.460** (0.207)		0.797*** (0.192)	0.698*** (0.205)	0.721*** (0.197)
Elderly population (%)		0.560 (0.469)	0.502 (0.459)		0.650 (0.467)	0.536 (0.463)	0.543 (0.443)
Urban population (%)		−0.117*** (0.039)	−0.144*** (0.037)		−0.121** (0.045)	−0.154*** (0.044)	−0.168*** (0.043)
Governor party			0.066*** (0.015)			0.058*** (0.015)	0.058*** (0.015)
President party			0.110*** (0.025)			0.112*** (0.026)	0.111*** (0.026)
Tax revenue p.c.							0.000*** (0.000)
State transfers p.c.							−0.000 (0.000)
Constant	0.406*** (0.019)	0.174 (0.159)	0.217 (0.157)	0.403*** (0.021)	0.053 (0.150)	0.113 (0.148)	0.106 (0.142)
Observations	5,221	5,221	5,221	4,002	4,002	4,002	4,002

Fundação Getúlio Vargas Praia de Botafogo, 190 11º andar, 22253-900 Rio de Janeiro RJ Brazil, Tel.: +55 21 3799-5831 , Fax: +55 21 2553-8821 - Rio de Janeiro - RJ - Brazil
E-mail: rbe@fgv.br

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