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Title: Politics and Preschool: The Political Economy of Investment
Citation Type: Working Paper
Publication Year: 2010
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Abstract: What drives governments with similar revenues to publicly provide very di erent amountsof goods for which private substitutes are available? Key examples are education andhealth care. In this paper, I focus on pre-primary education in Brazil. I show that areaswith higher median income and more income inequality allocate less of an exogenousrevenue increase to education and more to public infrastructure, which does not haveprivate substitutes. I exploit a 1998 education nance reform to ensure that my resultsare credibly causal and do not merely reect omitted variables that a ect both tastesand income. This result can be explained by two separate theories. The rst, \collectivechoice," hypothesizes that richer people are more likely to consume the privateversion of a good, especially as their incomes diverge from those of others in their area.Because they do not use the publicly-provided good, they do not support governmentspending on it. The second, \political power," hypothesizes that the rich are able toexercise control over public policy that is roughly proportionate to their share of income,as opposed to their share of votes. Thus, the poor may have little ability to makegovernment publicly supply the goods they most demand. I attempt to apportion theestimated e ect between these two theories by examining whether Brazilian municipalitieswith Participatory Budgeting, a form of governance designed to ensure that thepoor have a strong role in policy making, allocate exogenous revenue di erently thanother municipalities. My results suggest that both the collective choice and politicalpower theories are operative.
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Authors: Kosec, Katrina
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Publication Number: 5647
Institution: The World Bank
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Data Collections: IPUMS USA
Topics: Education
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