Punished but Not Defeated? Economic Shocks, Challenger Entry, and Incumbent Accountability in Brazil

Incumbent accountability is one of the main channels through which retrospective voting operates, often assessed through changes in vote share and reelection success. However, punishment may reduce an incumbent’s vote share without crossing the threshold for office turnover. Drawing on the 2014 Petrobras scandal and the global oil crisis, which decreased royalty inflows to oil-dependent Brazilian municipalities, I argue that economic shocks should produce punishment both in terms of vote loss and reduced survival in office. Using a differences-in-differences design, I provide causal evidence that mayoral incumbents lose votes in municipalities that suffered royalty losses, but their reelection success is not hindered. I further argue that the mechanism behind losing votes is an increase in the supply of challengers in the first election after the shock. Incumbents’ heightened vulnerability should incentivize contenders to run, as they perceive greater opportunities to win. Using post-shock royalty loss as an instrument for competition, I show that the shock’s effect on vote share operates through increased challenger entry. In particular, it shows that in Brazil’s single-member district plurality elections, economic downturns foster fragmentation rather than coordination, dispersing anti-incumbent votes across multiple competitors instead of concentrating them behind a single viable challenger. The study contributes to debates on retrospective voting, democratic accountability, and the political consequences of resource dependence.