by Frederico Finan, UC Berkeley and Claudio Ferraz, UC Berkeley and IPEA. Reading for October 4, 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.