Economic voting theory states that economic conditions influence voting choices. Despite institutional and resource constraints, evidence shows that incumbents (mis)use the public machine pre-polls, leaving significant financial losses, employment, and capital distortions behind. Yet, little is known about the electoral return of this practice. In this paper, I focus on a policy instrument that has received little attention in the political budget cycle literature: credit. First, leveraging on a privatization reform in Brazil, I document political capture of state-owned banks. Departing from a new theoretical model, I rationalize credit allocation in elections (electoral credit cycle) depending on political competition, alliances, and information asymmetry between voters and politicians. Unlike previous research, I show that election types and partisan alliances matter in explaining electoral credit cycles. While no credit cycle is observed in local elections, incumbents prioritize politically competitive and non-allied regions during federal elections. Conditional on political competition, credit targeting is accentuated in more corrupt and less educated municipalities. This strategic behavior pays off, and I first document a credit-vote share elasticity of one to five. Finally, I show that incumbent presidents use banks to keep their political allies closer outside electoral periods by practicing patronage with credit. Similarly to fiscal transfers, I show that credit is preferably allocated into allied municipalities.

This paper studies how politics influences credit allocation by state-owned banks in Brazil during elections and provides evidence of tactical redistribution (i.e., the channeling of resources into strategic electoral areas).  Our estimates indicate that tactical redistribution occurs in episodes of total credit contraction, with public banks behaving countercyclically only in politically competitive areas. While in states with competitive races, public banks increase their credit provision when total credit contracts, in non-competitive races, public banks follow the behavior of private banks and also decrease the supply of credit. We do not find similar differences between competitive and non-competitive states for public banks during episodes of credit boom or for private banks during episodes of total credit expansion or contraction. In these three cases, public and private credit change in the same direction regardless of political competition.  We confirm our findings using a bank-specific daily interest rate, showing that public banks' rates react in the wake of election campaigns and between the first and second rounds.

Changes in relative energy prices are central to the green transition, but their effectiveness depends on firms’ ability to adjust their energy input mixes. This ability is captured by elasticities of substitution across energy inputs—parameters for which we lack empirical knowledge. Using firm-level microdata from several European countries, I estimate elasticities between clean and dirty energy, as well as among individual energy sources (e.g., electricity, natural gas, coal, etc.). They have declined over the past decades, vary significantly across sectors and countries, and are systematically lower among larger firms. I then embed these estimates in a standard model of technical change to simulate countries’ decarbonization paths. I document large cross-country differences in the reduction of dirty energy shares and the underlying drivers. Between 50 and 85 percent of the reduction is accounted for by within-firm substitution, with the remainder driven by between-firm reallocation, entry, and exit.