Three studies on the effects of social oversight of public expenditures on municipal fiscal condition
Name: SERGIO KRAKOWIAK
Publication date: 09/10/2023
Examining board:
Name |
Role |
|---|---|
| RENATO NUNES DE LIMA SEIXAS | Advisor |
Summary: Article 1 - This research examines the effect of social control over municipal Public Administration spending by social observatories. Ceteris paribus, the monitoring of public spending by social observatories should increase the likelihood of detecting inefficiencies, misappropriation of resources, and corruption, leading to a reduction in municipal expenses. Nevertheless, theory predicts circumstances that may nullify or even reverse these effects. In the international empirical literature, there is no consensus on the effectiveness of social control over public spending, and in Brazil, empirical literature on the subject is in its infancy. Thus, based on agency theory and the econometric approach of difference-in-differences, we test the hypotheses that in Brazil: (i) per capita expenses of municipal Public Administration tend to decrease when monitored by social observatories; (ii) observatory monitoring is especially effective in small municipalities with fewer than 50,000 inhabitants; (iii) the effectiveness of observatories varies between states; and (iv) observatories that operate in networks, such as those in the Observatório Social do Brasil (OSB) network, are more effective in controlling public spending than those that operate independently. The results suggest that Brazilian social observatories are highly effective, that at least partially this effectiveness increases in small municipalities, that the effectiveness of observatories in different states is indeed heterogeneous, and that OSB network observatories are not more effective than others. Article 2 - Education is one of the main targets of corruption in Brazilian municipalities. Failures in institutional mechanisms for controlling Public Administration allow municipal corruption to multiply, forcing organized civil society to mobilize. Since the mid-2000s, a strategy of monitoring the public sector by civil society, which uses social observatories to oversee the bidding processes and conduct of city halls and municipal secretariats, has been implemented in hundreds of municipalities. Despite this, there are doubts about the effectiveness of this form of social control, due to the scarcity of studies on its effects, especially in Brazilian municipal education, where there are no such researches. The international literature shows that illicit deviations and/or serious inefficiencies in the management of public education resources weaken the relationship between government spending and the population's access to educational services, so that statistically null coefficients or coefficients that are positive but close to zero for this relationship represent signs of corruption or serious inefficiencies. Based on this, this research evaluates the existence of signs of corruption/inefficiencies in the management of municipal education, analyzing whether the action of social observatories is capable of mitigating them. Using a methodological design that uses panel data and the generalized method of moments to estimate these coefficients in the pre- and post-intervention periods, comparing them to those of a control group selected by propensity score matching, we find evidence that suggests that social observatories are effective in fighting corruption, administrative inefficiencies and opportunistic behavior in the management of municipal education. Article 3 - This study examines the impact of social observatories on the fiscal condition of municipalities. In Brazil, one of the most decentralized countries in the world, municipal corruption is endemic, leading to grave fiscal issues. Social observatories, non-governmental organizations dedicated to enabling citizens to oversee local public administration, have arisen in response to this challenge. The paper employs the Firjan Index of Fiscal Management (IFGF) and its sub-indices as indicators of municipal fiscal health. The results, calculated using a methodology that melds matching techniques with difference-in-differences, suggest that the presence of social observatories considerably enhances the overall fiscal health of municipalities. This effect is manifested in a decline in the commitment of the municipal budget to personnel expenses in the second year after the observatories' introduction, and to capital expenditures in the first year. However, the initial improvements concerning capital expenditures are offset in the subsequent year, pointing to adaptive maneuvers by corrupt actors. The research underscores the effectiveness of social observatories as tools for societal control, while highlighting the ongoing need for initiatives to counteract the adaptive strategies of corruption.
