Do bigger legislatures lead to bigger government? Evidence from a Brazilian municipal council reform

Do bigger legislatures lead to bigger government? We exploit a Brazilian reform that allocated the number of municipal council seats based on population thresholds in a regression discontinuity design. We find that larger councils have significantly higher public expenditures on social goods and legislative costs. Increased spending is partly financed by significantly higher local tax revenues and is driven by a less salient form of tax to voters – on services – than property taxes. As a potential explanation for our findings, we show that, more council seats led to greater political diversity.