Exposing Corrupt Politicians: The Effect of Brazil's Publicly Released Audits on Electoral Outcomes
by Frederico Finan, UC Berkeley and Claudio Ferraz, UC Berkeley and IPEA. Reading for October 4, 2005
Published: Tuesday, September 27, 2005
This paper tests if reducing the asymmetry of information between voters and politicians affects electoral outcomes. Specifically, we estimate the impact of disclosing information about local governments' corruption practices on the incumbent mayors' performance in the municipal elections. To do so, we exploit a unique quasi-experiment provided by a recent anti-corruption program in Brazil that randomly audits municipal expenditure of federally transferred funds. Using this exogenous variation in which municipalities were audited before versus after the municipal elections, we find that the disclosure of information of audits had a significant impact on the reelection rates of mayors that were found to be corrupt. In particular, for a marginal increase in reported corruption, the audit policy reduced the incumbent's likelihood of reelection by 27 percent. We also find this effect to be more pronounced in municipalities where radio stations are present and higher levels of corruption are revealed. These findings highlight the value of information and the role of media in reducing informational asymmetries in the political process, thus enabling voters to not only hold corrupt politicians accountable but also reward non-corrupt politicians.
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