Fiscal Rules and the Selection of Politicians: Evidence from Italian Municipalities

Matteo Gamalerio (Institut d'Economia de Barcelona, UB)

Abstract : Despite the wide adoption, there is little evidence on the consequences of fiscal rules for the quality of government. I use data from Italian municipalities to study how fiscal rules affect the selection of politicians. In 1999, the Italian government applied fiscal rules to all municipalities. In 2001, it removed them for municipalities with less than 5000 inhabitants. Using a Difference-in-Discontinuity design, which enables control for an institutionally mandated increase in the wage paid to politicians at the 5000 threshold, I show that fiscal rules negatively affect the level of education of politicians. The result highlights a trade-off to fiscal rules. Reducing policymaking discretion may alleviate inter-jurisdictional externalities, but it may also lower the quality of the political class.

How Research Affects Policy: Experimental Evidence from 2,150 Brazilian Municipalities

Diana Moreira (University of California, Davis)
Jonas Hjort (Columbia University)
Gautam Rao (Harvard University)
Juan Santini (IPA)

Abstract : This paper investigates if research findings change political leaders’ beliefs and cause policy change. Collaborating with the National Confederation of Municipalities in Brazil, we work with 2,150 municipalities and the mayors who control their policies. We use experiments to measure mayors’ demand for research information and their response to learning research findings. In one experiment, we find that mayors and other municipal officials are willing to pay to learn the results of impact evaluations, and update their beliefs when informed of the findings. They value larger-sample studies more, while not distinguishing on average between studies conducted in rich and poor countries. In a second experiment, we find that informing mayors about research on a simple and effective policy (reminder letters for taxpayers) increases the probability that their municipality implements the policy by 10 percentage points. In sum, we provide direct evidence that providing research information to political leaders can lead to policy change. Information frictions may thus help explain failures to adopt effective policies.

Political Turnover, Bureaucratic Turnover, and the Quality of Public Services

Diana Moreira (University of California, Davis)
Mitra Akhtari (Airbnb)
Laura Trucco (Amazon)

Abstract : We study how political turnover in mayoral elections in Brazil affects public service provision by local governments. Exploiting a regression discontinuity design for close elections, we find that municipalities with a new party in office subsequently appoint new personnel to the municipal bureaucracy across the board: across multiple service sectors, and at both managerial and non-managerial levels. In education, the sharp increase in the replacement rate of personnel in schools controlled by the municipal government is also accompanied by test scores that are .05-.08 standard deviations lower. In contrast, turnover of the mayor's party does not impact local (non-municipal) schools. These findings suggest that political turnover can adversely affect the quality of public services when the bureaucracy is not shielded from the political process.