Redistributing Loyalty? Political Determinants of Municipal Funding in Chile (2009–2023)

Transparent and objective criteria for the distribution of resources from central government to local government are essential to mitigate territorial inequality. On the contrary, discretionary power can deepen inequalities and promote corruption. This study examines the influence of political factors on the distribution of government resources to municipalities in Chile during 2009 and 2023. Using panel models with fixed effects, robust standard errors and interactive terms, the analysis reveals that municipalities governed by mayors from the same political party as the president received on average significantly higher transfers during that period from central government. These findings also underline the role of electoral strategy, highlighting how central government resources were distributed to reinforce political alliances during local government elections.