Oil windfalls and tax inefficiency: evidence from Brazil

Fernando Antonio Postali

No 2014_02, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: This paper investigates whether Brazilian municipalities are losing efficiency when collecting local taxes in response to oil windfalls. A two-stage procedure was adopted. First, we calculate the efficiency scores for tax collection using the Data Envelopment Analysis (DEA) method. In the second stage, the efficiency scores are used as the dependent variable in a quantile regression model to assess whether oil rents affect this indicator. The results reveal that the municipalities benefitting from oil revenues (royalties) reduce their efficiency in collecting taxes in response to such grants, which signals that they generate some type of X-inefficiency in municipal public management. Using a Cost-Minimization DEA, it is possible to avoid the problem of mixing technical efficiency with unobservable preferences on public goods. It is also possible to decompose efficiency within three components: technical, allocative and economic.

Keywords: Data envelopment analysis; quantile regression; oil royalties; public sector (search for similar items in EconPapers)
JEL-codes: H21 H71 Q33 (search for similar items in EconPapers)
Date: 2014-03-18
New Economics Papers: this item is included in nep-eff, nep-ene, nep-lam and nep-pbe
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Journal Article: Oil windfalls and X-inefficiency: evidence from Brazil (2016)
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