Development via Administrative Redistricting : Evidence from Brazil

We exploit a large redistricting episode in Brazil to examine if, and how, administrative unit splits impact local development. Using a rich panel of administrative and spatial data, our difference-in-differences strategy compares municipalities whose re- quests to split were approved to those whose requests were left unapproved due to a unique policy change that curbed the creation of new municipalities. We find that splitting leads to an expansion of the public sector, growth in economic activity, and improvements in public service delivery in new municipalities. Original municipalities remain unaffected. Results suggest that new municipalities adapt policies to local preferences. Our findings inform the equity-efficiency trade-off embedded in decentralization reforms worldwide