Voters Sometimes Provide the Wrong Incentives. The Lesson of the Brazilian Drought Industry

Citizen assessment of government performance is a cornerstone of the successful functioning of democracy. However, accountability is a double-edged sword. When voters misunderstand the stakes and provide the wrong incentives... [ view full abstract ]

Citizen assessment of government performance is a cornerstone of the successful functioning of democracy. However, accountability is a double-edged sword. When voters misunderstand the stakes and provide the wrong incentives to elected officials, political accountability leads to an implementation of suboptimal welfare policies. This paper reveals that an electorate can demand clientelism. I find evidence that after a drought, voters increase the vote share of local incumbent parties that are politically aligned with the central government to ensure the inflow of partisan government aid relief. Such behavior reinforces the central government's incentives to bias policies in favor of politically aligned municipalities to influence elections. Consequently, the circle of distortion of aid relief allocation is perpetuated. The data cover the Brazilian democratic elections from 1998 to 2012. I use fixed effects models with panel data and a regression discontinuity design with heterogeneous treatment effects. The results resemble a long-run patronage equilibrium.