Government Subsidies and Political Elections: Evidence for Chile

In this paper, we explore the effects of government subsidies (monetary and in-kind) in presidential elections in Chile in 1989-2000. Our dependent variable is the percentage of votes obtained by the incumbent. We use a panel with three periods (the elections of 1989, 1993 and 1999) and 228 counties. We correct for the potential simultaneity problem derived from the fact that an incumbent facing a difficult political scenario might react by increasing subsidies to improve his/her electoral performance. Our results indicate that the greater the government spending on these types of programs (measured by the percentage of the population that receives the subsidy), the higher the votes for the incumbent. When we separate monetary and in-kind subsidies, we find that only inkind subsidies are statistically significant. We estimate that to obtain an additional vote, the incumbent has to spend between US$1,680 and US$1,920 (measured in PPP) in government subsidies.