Abstract
Fiscal contract theories hypothesize that government performance affects tax collection and that institutions that foster representation and accountability link taxes and services. These propositions rest on strong assumptions about information and have not been tested rigorously. We use municipal audit reports with objective measures of corruption from Brazil to assess whether new information about corruption affects municipal property tax collection and the structure of fiscal institutions. We find short-run effects consistent with this theory: property tax revenue rises with clean audit reports and falls as revealed corruption increases; furthermore revealed corruption increases the probability that a municipality adopts participatory budgeting. The effect of revealed corruption increases marginally when audits are released before elections, suggesting that elections are one, but not the sole, mechanism connecting revealed corruption with changes in fiscal outcomes. Our results indicate modest demand-side constraints on taxation and budgetary institutions that are consistent with fiscal contract theory.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
