Chapter 3 tests the book’s theory in Brazilian mayoral elections, drawing on evidence from fieldwork, secondary sources, and administrative data. Consistent with theoretical expectations for a setting with wide scope and low capacity, Brazilian incumbents suffer from a large incumbency disadvantage. While fiscal institutions structurally condition incumbent capacity and generate persistent levels of incumbency bias, exogenous shocks to capacity lead to changes in incumbency bias over time and across subnational units. This chapter illustrates that changes in fiscal transfers lead to variations in incumbency bias. It also exploits Brazil’s Fiscal Responsibility Law of 2000 as a natural experiment to determine how institutional shocks shape capacity. Using a differences-in-differences design,it demonstrates that incumbency disadvantage only emerged in municipalities running deficits – where the law was binding. This appears to reflect changes in public goods spending rather than in personnel spending – a proxy for patronage. The chapter also establishes that term limits increase incumbency disadvantage by attenuating performance voting and increasing costs of ruling.