Intergovernmental transfers and fiscal effort in Peruvian local governments

Fernando Aragon and Vilma Gayoso

MPRA Paper from University Library of Munich, Germany

Abstract: The purpose of this paper is to identify the causal relationship between intergovernmental transfers and fiscal effort. Empirical evidence from Peruvian municipalities supports a negative relation. The substitution effect is decreasing on the level of municipalities’ expenditure and tends to disappear for high-expenditure localities. Given this phenomenon, devolving responsibilities to sub-national governments might reduce fiscal effort and deteriorate fiscal balance especially among localities with lower fiscal capacity. A possible solution might be the inclusion of fiscal effort indicators in the intergovernmental transfer design.

Keywords: fiscal effort; intergovernmental transfers; fiscal decentralization; local taxation (search for similar items in EconPapers)
JEL-codes: H71 H77 (search for similar items in EconPapers)
Date: 2005-10
New Economics Papers: this item is included in nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:2108

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