Does Oil Make Leaders Unaccountable? Evidence from Brazil's Offshore Oil Boom

Abstract

This paper examines the effects of oil revenues on local politics. We use geographical variation that determines how the revenues from offshore oil is distributed among coastal municipalities in Brazil to examine the effects of oil rents on local politics. Different from existing studies, we focus both on the short-run and long-term effects. We find that incumbent mayors are reelected in the short run following the initial oil boom. The reelection is due to increasing public spending. Nonetheless, using changes in 10 years we find no significant improvements in public good provision and local welfare leading voters to punish politicians in the long-run. The results are consistent with a model where voters become informed and learn the use of fiscal revenues in the long-run. With Joana Monteiro