Political Organization and Public Investment: Evidence from Close Municipal Elections

Abstract: Using a national law and close municipal elections in Peru, I implement a nonparametric regression discontinuity framework estimating the impact of political organization on municipal investments upon the advent of regulation integrating municipalities into a national public investment system. Nationwide party mayors elected in close contests increase municipal investment by 60% compared with local party mayors; they also seek more external contracting investment deals with more diverse outside partners and obtain more beneficial social outcomes for their communities. Evidence on organizational structure and capabilities as channels for the influence of nationwide party victories is discussed.