The Predatory or Virtuous Choices Governors Make: Political Institutions and Economic Performance

States usually differ markedly in terms of public goods provision and corruption. Why are some state governments able to provide adequate health and education services, but others tend to specialize in the provision of private goods such as public sector jobs and targeted transfers to specific clienteles? Why are some states better capable of promoting economic development while others allow stagnation? Why is corruption more prevalent in some states than in others? Why are some states more efficient in the provision of goods and service than others? Exploring the idea that political institutions are important determinants of the policies implemented in states, we propose a model of the policymaking process and then test its implications with state-level data for the period 1999 to 2006 in Brazil. The focus of the empirical tests is on the impact of political competition and checks & balances on the characteristics of the policies that emerge in the states. Political competition has important virtuous effects on the choices made by governors and other political actors by determining how long they expect to be in power, what they can do while in power, and at what costs. We develop an index of checks & balances for Brazilian states and test the interaction of checks & balances with political competition. We found that the impact of political competition varies with the degree of checks & balances.