[Job Market Paper] The Macroeconomic Effects of Tax Competition: the Brazilian "Fiscal War'' and Public Goods Underprovision [Draft]
Social welfare and economic development can be hindered by a heterogeneous corporate tax system. I study the role of tax competition between state governments in lowering overall public goods provision and income levels. To do so, I build a multi-region general equilibrium model with endogenous state taxes, public expenditures, and firm location choices. I then estimate the model to match novel data encompassing state-level tax exemptions at the sector level in Brazil. I find that tax competition costs Brazil 11 percent of its citizens' real income and 19 percent of its state public goods provision. Centralized taxation emerges as a potential remedy to mitigate these losses, although it would inevitably create both winning and losing states.
The costs of running a minority government [Draft]
Executive branch representatives must garner support from elected legislative officials to govern. Building a legislative majority is an important stepping stone in most executive-branch mandates. This majority-building process may, however, impose significant costs upon society. Using a regression discontinuity design, I show that municipalities in Brazil whose mayors hold few seats in the municipal chamber experience substantially more turnover in their bureaucracy. RD estimates demonstrate that non-tenured civil servants are hired (+46.7 percent) and fired (+37.5 percent) at substantially higher rates under minority mayors. This turnover is not confined to high-ranking government positions but extends to roles filled by both skilled and unskilled public servants. Using teacher and school principal surveys, I show that these new hires are generally inexperienced workers who fall short in indicators of job performance. Ultimately, municipalities that elect a mayor with limited legislative support experience a significant drop in standardized test scores (-0.048 to -0.073 std. dev.).