Are mayors with business experience better politicians? Evidence from close races in Brazil

Abstract

This paper examines whether policy outcomes differ under politicians with business experience. Using a regression discontinuity analysis for mayoral elections in Brazilian municipalities in the period 2004-2012, I find that business experience per se does not affect public finance, public employment, the number of subsidized sectors or the level of corruption. However, a separate analysis for entrepreneurs and merchants, the two main business-groups in the sample, shows that only relatively ”high level” businesspeople with proper management expertise can significantly impact policy outcomes. In light of this, I find that entrepreneurs are likely to attract more transfers from higher government levels and therefore, increase the municipality’s total revenue. This in turn allows them to raise total expenditure and hire more direct active administration employees. On the contrary, I do not observe any significant effect when a merchant becomes mayor.