FEDERALISMO FISCAL E CRESCIMENTO DO GOVERNO: EVIDÊNCIAS ELEITORAIS PARA O BRASIL

Political economy literature considers fiscal federalism as a mechanism to refrain the growth of government. However, an unbalanced federalism may induce government growth. This paper studies the Brazilian case, in which the municipalities are beneficiaries of a common pool of federal and state fiscal resources. It is shown that an increase in municipal expenditure and the creation of new municipalities, funded by the common pool, are winner electoral strategies for mayors that seek reelection, which induces the growth of government through the years. It is used a probit selection econometric model.