The influence of decentralized taxes and intergovernmental grants on local spending volatility

Agnese Sacchi and Simone Salotti

No 1405, Working Papers. Collection A: Public economics, governance and decentralization from Universidade de Vigo, GEN - Governance and Economics research Network

Abstract: We study what affects the volatility of sub-central spending in 20 OECD countries. The evidence based on data from 1972 to 2007 shows that the volatility of intergovernmental grants from upper levels is positively associated with the volatility of local expenditure. On the contrary, the volatility of local tax revenues - mainly that of property taxes - exerts the opposite effect. Thus, making local governments rely more on grants than own taxes seems to adversely affect the stability of their spending, while allowing them to autonomously levy taxes on responsive tax bases provides incentives to smooth their expenditure.

Keywords: local spending volatility; local revenues; property taxes; intergovernmental grants. (search for similar items in EconPapers)
JEL-codes: E62 H71 H77 R50 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2014-07
New Economics Papers: this item is included in nep-acc, nep-mac, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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http://infogen.webs.uvigo.es/WP/WP1405.pdf First version, 2014 (application/pdf)

Related works:
Journal Article: The influence of decentralized taxes and intergovernmental grants on local spending volatility (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:gov:wpaper:1405

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