The Impact of Capital Expenditure on the Probability of Reelection of Mayors at the District Level in Peru

Abstract

Abstract. Until recently, elected authorities in Peru were allowed to run for re-election. The objective of this study is to test whether voters reward (or punish) elected authorities according to expenditure performance. In particular, I measure the probability of a mayor being reelected subject to their capital expenditure throughout the four-year term. I study the two most recent electoral terms: 2006-2010 and 2010-2014. To deal with the endogeneity of capital expenditure, the model controls for a number of characteristics of the elected authority and his or her political party (including the share of voted obtained in the previous election), for district characteristics and for other characteristics of the municipality. I find that mayors who get reelected for another four-year termare characterized by high levels of capital expenditure throughout the periods of 2007-2010 and 2011-2014. In particular, the years before the electoral processes, 2009 and 2013, seem to be of vital importance to determine the outcome of an election. A more refined question is answered by looking at both timing and type of expenditure which reveals that the electorate values the provision of public goods such as security, electrification, education, health and roads during the electoral term. Voters tend to punish projects related totransportation, communications and plumbing, which are characterized by the destruction of roads in the electoral years.

Keywords. Reelection, Decentralization, Public capital expenditure, Local governments.

JEL. D72, D73, H70.