Can anti-corruption policies contain political budget cycles? Evidence from public employment in Brazil

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A vast literature on political cycles has shown that politicians often manipulate policy tools ahead of elections to win votes. Yet much less is known about the effects of policies designed to contain these cycles. I argue that legal constraints on politicians’ discretion over inputs like spending, debt, transfers, or hiring ahead of elections simply displace –and can even exacerbate– such cycles. I demonstrate these unintended consequences using large, monthly panels of Brazilian municipalities to measure cycles in public employment. Federal laws ban hiring and firing bureaucrats in a 6-month period around elections, which take place at the same time throughout the country. Consistent with politicians anticipating and strategically responding to these constraints, hiring decreases during this freeze period, but increases in the months before the ban. These patterns are even more pronounced in localities that experience a randomized anti-corruption audit. Civil service hiring also follows electoral cycles, which are more pronounced in localities where civil servants take up a larger share of the bureaucracy. These findings highlight how the effectiveness of anti-corruption strategies can be undermined by politicians’ strategic responses to them.