Breaking-up: Do Smaller Jurisdictions Provide Better Public Services?

We exploit institutional changes promoted by the 1988 Brazilian Constitution estimate the impacts of municipality subdivisions on the quality and size of local bureaucracy, the provision of public services, and social... [ view full abstract ]

We exploit institutional changes promoted by the 1988 Brazilian Constitution estimate the impacts of municipality subdivisions on the quality and size of local bureaucracy, the provision of public services, and social outcomes. After the Constitution, most states set minimum population sizes to allow the establishment of new towns, leading to an increase of 40% in the number of local governments. Using a Regression Discontinuity Design, we find positive effects on the provision of basic public services, and reductions in poverty and infant mortality. Areas with territorial subdivision employ more qualified civil servants and pay higher wages, which contributes to increase local income inequality.