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On the determinants of fiscal sustainability of municipalities in Colombia. The case of Antioquia, 2008-2017

Jorge Barrientos-Marín (), Juan Felipe Quintero-Vanegas () and Manuela Mendoza-Jaramillo ()
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Jorge Barrientos-Marín: Universidad de Antioquia
Juan Felipe Quintero-Vanegas: Universidad Autónoma Latinoamericana
Manuela Mendoza-Jaramillo: Universidad Autónoma Latinoamericana

Lecturas de Economía, 2020, issue 92, 173-200

Abstract: In this work we are interested in establishing the determinants of fiscal sustainability, including if the spending rules, such as Law 617 of 2000 contributed to the promotion of the sustainability of public finances in the 125 municipalities of the department of Antioquia (Colombia) in the period 2008-2017. For this we exploit the observable heterogeneities between the 125 municipalities of Antioquia in the period 2008-2017, due to the endogeneity of variables such as debt and the number of companies we use a Hausman and Taylor estimator. Our econometrics results are statistical significant and the estimated parameters suggest that the law is effective in increasing tax revenue and investment spending, but they are not conclusive about effectiveness in reducing operating expenses; other variables of municipality characteristics such as the number of companies and pre-existing indebtedness are explanatory and predictive of the behavior of tax revenues, operating expenses and investment expenditure

Keywords: public finances; fiscal sustainability; budget deficit; deficit bias; random and fixed effect; endogeneity (search for similar items in EconPapers)
JEL-codes: H1 H7 H60 C33 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.17533/udea.le.n92a06

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Handle: RePEc:lde:journl:y:2020:i:92:p:173-200