Shared Mandates, Moral Hazard and Political (Mis)alignment in a Decentralized Economy

Antonio Estache, Grégoire Garsous () and Ronaldo Seroa da Motta

Working Papers ECARES from ULB -- Universite Libre de Bruxelles

Abstract: This paper investigates the effects of political (mis)alignment on public service deliverywhen mandates are shared between state and local governments. We analyze sewage treatmentpolicies in the State of São Paulo, Brazil. Based on a regression discontinuity design, we establisha causal relationship between political alignment and higher sewage treatment provision.Conceptually, we find that, with uncertain local commitment and weakly enforceable localobligations, shared mandates lead to a moral hazard issue implying service under-provision.When political alignment is an option, our results show that it attenuates such moral hazardeffects.

Keywords: political alignment; infrastructure provision; moral hazard; regression discontinuity design (search for similar items in EconPapers)
JEL-codes: H40 H54 H70 P48 (search for similar items in EconPapers)
Pages: 29 p.
Date: 2014-11
New Economics Papers: this item is included in nep-cta, nep-pbe, nep-pol, nep-pub and nep-tre
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Shared Mandates, Moral Hazard, and Political (Mis)alignment in a Decentralized Economy (2016)
Working Paper: Shared Mandates, Moral Hazard, and Political (Mis)alignment in a Decentralized Economy (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eca:wpaper:2013/177104

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