End of the line: The Effects of Intergovernmental Grants on Local Revenue: Evidence from Chile

Javiera Bravo

No 393, Documentos de Trabajo from Instituto de Economia. Pontificia Universidad Católica de Chile.

Abstract: This paper presents research on the effect of intergovernmental grants on local government revenue in Chile. Intergovernmental grants are endogenous and I exploit a kink in a component of the Chilean formula for resource distribution for a panel of 340 Chilean municipalities from 1990 to 2007. I find empirical evidence that for Chilean municipalities, intergovernmental grants have a negative effect on local revenue. Specifically, an increase in per capita grant amount of one standard deviation is associated with a decrease of between 0.25 and 0.32 standard deviations in local per capita revenue. This effect is not uniform for different kinds of local revenue.

Keywords: Fiscal decentralization; intergovernmental grants; local government revenue; local collection; regression kink design (search for similar items in EconPapers)
JEL-codes: H21 H39 H71 H77 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:ioe:doctra:393

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