Tying Your Enemy's Hands in Close Races: The Politics of Federal Transfers in Brazil

This paper uses a regression discontinuity design in close electoral races to disclose utterly political reasons behind the allocation of intergovernmental transfers in a federal state. We identify the effect of political alignment on federal transfers to municipal governments in Brazil, and we find that---in preelection years---municipalities where the mayor is affiliated with the coalition (and especially with the political party) of the Brazilian President receive larger discretionary transfers for infrastructures by about one-third. This effect is mainly driven by the fact that the federal government penalizes municipalities run by mayors from the opposition coalition who won by a narrow margin, thereby tying their hands for the next election.