Distributional Effects of Intergovernmental Transfers in Mexico

Carlos Rodriguez Castelan (), Kiyomi Cadena () and Laura Moreno Herrera ()
Additional contact information
Carlos Rodriguez Castelan: World Bank
Kiyomi Cadena: World Bank
Laura Moreno Herrera: World Bank
Authors registered in the RePEc Author Service: Carlos Rodríguez-Castelán

No 13148, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: A rigorous understanding of the developmental effect of fiscal transfers to subnational governments remains an important policy research issue globally. This paper exploits a novel dataset of 20 years of municipal poverty maps and local public finances to study the effects on local welfare of a large fiscal transfer fund earmarked for social investment in more than 2,000 Mexican municipalities. Results show a positive but modest effect on the average household income, and positive effects on seven nonmonetary welfare measures. In contrast, these funds have no significant impact on extreme and moderate monetary poverty. These results provide important lessons for policy on the effects of earmarked funds to reduce territorial poverty and inequality in terms of incentives to design formulas to distribute earmarked fiscal resources to subnational governments.

Keywords: fiscal federalism; earmarked transfers; decentralization; poverty; Mexico (search for similar items in EconPapers)
JEL-codes: C26 D30 H72 H77 I3 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2020-04
New Economics Papers: this item is included in nep-dev and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Distributional Effects of Intergovernmental Transfers in Mexico (2020)
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