LOCAL SPENDING, TRANSFERS, AND COSTLY TAX COLLECTION

2013/06/01 by Fernando M. Aragon, Fernando M. Aragón
Social Sciences · Economics, Econometrics and Finance · #Local Government Finance and Decentralization #Fiscal Policy and Economic Growth #Taxation and Compliance Studies

paper · doi:10.17310/ntj.2013.2.03

Abstract

This paper studies the effect of relatively costly local taxation on the fiscal response of local governments to intergovernmental transfers. Using a panel dataset of Peruvian municipalities, I find robust evidence that the central government's grants have a greater stimulatory effect in municipalities facing higher local tax collection costs. The results are consistent with the hypothesis that relatively costly local taxation may partially explain the flypaper effect.

Citations

• An Essay on Fiscal Federalism

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