Do Special Transfers to Incentivize Local Tax Revenue Effort Work?

Gustavo Canavire-Bacarreza, Kenyi Cansino, Luis Castro-Peñarrieta, Jorge Martinez-Vazquez () and Javier Beverinotti
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Gustavo Canavire-Bacarreza: World Bank, Poverty and Equity Global Practice, and Universidad Privada Boliviana
Kenyi Cansino: International Fund for Agricultural Development
Luis Castro-Peñarrieta: Centro de Investigacion y Docencia Economicas (CIDE), Department of Applied Economics, and Universidad Privada Boliviana
Javier Beverinotti: Inter-American Development Bank, Andean Countries Department

International Center for Public Policy Working Paper Series, at AYSPS, GSU from International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University

Abstract: Many decentralized countries struggle with low levels of subnational tax effort. As a remedy for this situation, specific-purpose incentive schemes designed for own revenue mobilization at the subnational level can be simple, efficient, and cost-effective tools. We examine the effects of an incentive transfer program established in 2010 in Peru aimed at increasing property tax revenue at the subnational level. Specifically, Peruvian districts would receive a monetary transfer if they increased their property tax collection above a certain threshold in the previous year, thereby raising their own revenues. Using quasi-experimental methods, we find that the property tax revenue of districts that (actively) participated in the program significantly increased over the following decade. Our results are robust to the choice of estimator and a series of additional tests.

Pages: 30 pages
Date: 2026-03
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Persistent link: https://EconPapers.repec.org/RePEc:ays:ispwps:paper2612

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