Intergovernmental politics of fiscal balance in a federal democracy: the experience of Brazil, 1996-2005

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Official URL: http://dx.doi.org/10.1111/j.1548-2456.2015.00261.x

Irresponsible fiscal behavior by subnational units is a concern for federal or decentralized systems, especially in the developing world. States' expenditures in Brazil have been no different. Still, spending varies considerably among the Brazilian states, even after controlling for their financial resources. This article provides a political explanation for the variation in current spending, focusing on intergovernmental political relationships. It argues that credit claiming for pork distributed in a state plays a crucial role and that governors elevate state spending in order to make up for their loss in political credit from the pork distributed by the president. Analyzing data from the period 1996-2005, it finds that expenditures decrease as the relative number of federal deputies from the state governor's party increases compared to the number of deputies from the president's governing coalition when the national agenda encourages federal pork distribution in the states.