Political Budget Cycle: An Analysis of Brazilian Municipalities

Abstract

The study investigates the behavior of committed expenses, investment expenditures and loan during an election period in Brazilian municipalities with a population equal to or greater than 50 thousand inhabitants, as well as whether these same municipalities meet the legal requirements regarding the source and limit of budget resources in an election year, as established by Law No. 11,300/06, in the period 2000-2016. The research sample represents 66% of the Brazilian population. The method applied for data analysis was tobit regression on panel data, grouped by municipalities, corresponding to 353 municipalities, 5 regions and 6001 observations. The findings indicate that there are no changes in the expenses committed before, during and after the electoral period, regardless of party equality and election in two rounds. With regard to spending on investments and loan during an election period, the study suggests an average increase of 9% and 68% respectively, with greater intensity when there is party equality between municipal and state governments, especially in the process of reelection. As for compliance with legal requirements on the use of budget resources in an election year, the study indicates that local governments do not comply with current normative instructions. Contributions: Considering that there is no consensus in the specialized literature on the behavior of public spending, this study contributes to the literature and future research because it innovates through a robust and effective statistical method, the disclosure of spending behavior in local governments in election period.