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Effect of central transfers on municipalities’ own revenue mobilization: Do conflict and local revenue management matter?

Jean Brun () and Tiangboho Sanogo ()

No 201716, Working Papers from CERDI

Abstract: This paper analyzes the effect of the transfers from central government to municipalities on the revenue mobilization by municipalities in Côte d’Ivoire over the period 2001-2014. The analysis is based on a new carefully-constructed dataset covering the conflict and post conflict periods for 115 municipalities. A two-stage least squares estimator is combined with the Grouped Fixed Effects estimator to address a potential endogeneity bias and to allow for unobserved heterogeneity varying over time. The results show a statistically significant and positive effect of central transfers on revenue mobilization by municipalities for both tax revenue and non-tax revenue. The effect of transfers is found to be higher for tax revenue than for non-tax revenue. The conflict eroded the capacity of municipalities to raise revenue. During the conflict, a 10 percent increase in transfers is associated with a 3.3 percent increase in revenue mobilized by municipalities, while this increase reaches 5.9 percent after the conflict.

Keywords: Municipality; Own revenue; Fiscal decentralization; Grouped fixed effect; Conflict; Côte d’Ivoire. (search for similar items in EconPapers)
JEL-codes: O1 H7 H3 (search for similar items in EconPapers)
Pages: 41
Date: 2017-10
New Economics Papers: this item is included in nep-ure
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