Federico Sturzenegger (Universidad Torcuato Di Tella - Kennedy School of Government, Harvard University) Rogério L. F. Werneck (Departamento de Economia, PUC-Rio)
Abstract
This paper studies the sources of procyclicality for the spending of subnational governments in Argentina and Brazil. We find that tax sharing schemes explain only a marginal share of the prociclicality of revenues, with most of the prociclicality coming from subnational government’s own resources. This is more so when the prociclicality of each source is measured vis a vis each jurisdiction’s output. Cross jurisdiction evidence supports the claim that procyclicality of spending results from the procyclicality of revenues, through the so called “voracity effect”. The conclusion is that the debate on prociclical subnational spending should focus on improving the tax collection schemes at the local level and not on reforming the tax sharing agreements.
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Article provided by Facultad de Ciencias Económicas, Universidad Nacional de La Plata in its journal Económica.
Volume (Year): LII (2006) Issue (Month): 1-2 (January-December) Pages: 151-194 Download reference. The following formats are available: HTML
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Find related papers by JEL classification: E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook H7 - Public Economics - - State and Local Government; Intergovernmental Relations
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