Measuring Fiscal Spillovers in Brazilian Municipalities

Marcelo Castro and Enlinson Mattos

Public Finance Review, 2021, vol. 49, issue 2, 221-261

Abstract: This article documents fiscal spillovers after an exogenous increase in the main federal transfer to Brazilian municipalities. We explore that Municipalities’ Participation Fund is distributed according to the local population and abruptly changes at some thresholds. We disentangle spillovers using bordering municipalities near different cutoffs, showing that the flypaper effect in local economies can be partially explained by bordering municipalities’ grants—roughly 20 percent. Fiscal spillovers are generally positive, except for spending in public health and sanitation for some population ranges.

Keywords: fiscal federalism; program evaluation; fiscal spillover; flypaper effect (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:49:y:2021:i:2:p:221-261

DOI: 10.1177/1091142121993522

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