Regional Heterogeneity of Preferences and Intergovernmental Transfers
Raul Ponce Rodriguez and
Benito Alan Ponce Rodríguez
Additional contact information
Benito Alan Ponce Rodríguez: Institute of Engineering and Technology, Universidad Autónoma de Ciudad Juárez, Ciudad Juárez 32545, Mexico
Economies, 2021, vol. 9, issue 1, 1-21
We develop a model with optimal shares of intergovernmental transfers, and we apply a simulation analysis of our model for the case of Mexico. The main outcomes of this paper are as follows: First, we provide optimal shares of intergovernmental funds to be allocated in each state considering the regional distribution of the benefits of local public spending in Mexico. Second, our analysis shows that the regional heterogeneity of preferences across regions should be an important determinant of federal funds allocated to state governments. Third, the current system of finance relies on a tax revenue sharing accord that emphasizes nationwide tax collection issues as the main determinants of intergovernmental transfers and local spending. Our analysis provides a contrast between how fiscal policy is conducted, and feasible choices of policy reform. Fourth, our analysis of simulation identifies winners and losers from policy reform, and so our analysis contributes to a better understanding of the advantages and shortcomings of the current policy of intergovernmental transfers, providing feasible ways to improve the outcomes of subnational government spending.
Keywords: intergovernmental transfers; fiscal federalism; income distribution; efficiency; heterogeneity of preferences (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:9:y:2021:i:1:p:33-:d:514127
Access Statistics for this article
Economies is currently edited by Ms. Helen Zhang
More articles in Economies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().