Feeding the Coalition: How Presidents Use State Banks to Buy Legislative Support for Governability

Abstract

This paper develops and tests a theory of how presidents use government agencies to manage legislative coalitions in multiparty presidential systems. We argue that agency decisions—particularly subsidized credit from state-owned development banks—function as retail coalition goods that sustain legislative support. Legislators are more likely to back the president when agency resources benefit subnational politicians who are both partisan allies and vital to their reelection networks. Using a regression discontinuity design based on close mayoral elections in Brazil and loan-level data from the National Development Bank (BNDES), we find that municipalities governed by coalition-aligned mayors receive significantly more favorable loan terms. Linking these data to roll-call votes, we show that legislators become more supportive of the president after loans are granted in their electoral strongholds managed by co-partisan mayors. These findings reveal how distributive agency decisions translate into legislative support, integrating bureaucratic discretion into theories of coalition management.