Judicial Presence and Rent Extraction

Abstract

We estimate the effect of state judiciary presence on rent extraction in Brazilian local governments. Rents are measured as irregularities related to waste or corruption uncovered by auditors. We exploit an informal institutional rule that assigns prosecutors and judges to the most populous among contiguous counties that form a judicial district. By comparing municipalities that are the most populous in their judicial districts with municipalities from other judicial districts in the same state that have identical population size but are not the most populous in their judicial districts, we find that state judiciary presence reduces the share of inspections that uncover irregularities related to waste or corruption by about 10%.