Abstract
Based on randomly allocated audit reports in Brazil, a recent empirical literature shows that the probability of re-election of an incumbent mayor decreases when corruption is released. By exploiting (i) the exogenous variation in the timing of the release of the audit reports; and (ii) the Brazilian institutions that regulates transfers blockages this paper sheds light on the mechanisms through which voters punish corrupt politicians. Two potential channels are empirically identified: (1) a loss of reputation directly linked to the dissemination of corruption information, and (2) a reduction in transfers from the central government. After the audit release every additional violation reported decreases transfers by 13.5%-19%. The impact of the dissemination of corruption information on the probability of reelection fades over time. Voters punish politicians when casting their votes if they can perceive this reduction in transfers due to the poorer supply of public goods.
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