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Testing regional intergovernmental transfers effects in Uruguay

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  • Leonel Muinelo-Gallo

    (Instituto de Economía de la Universidad de la República – Uruguay)

Abstract

Using an unbalanced panel of 18 Uruguayan regional governments from 1991 to 2017, we explore the hypothesis of flypaper and asymmetrical effects on the regional public expenditures. Specifically, the flypaper hypothesis states that the propensity of sub-national governmental units to spend intergovernmental unconditional transfers is higher than the propensity to spend on the demand for regional public services by local private agents. The application of panel data techniques with the use of instrumental variables highlights the presence of sizeable flypaper effect but not asymmetry ones. Our estimations also identify that political economy factors play an important role in the regional budgeting processes in Uruguay. This paper contributes to the scarce empirical evidence about the effects of unconditional central government transfers on subnational finances for middle-income countries.

Suggested Citation

  • Leonel Muinelo-Gallo, 2021. "Testing regional intergovernmental transfers effects in Uruguay," Sobre México. Revista de Economía, Sobre México. Temas en economía, vol. 2(4), pages 6-38.
    • Handle: RePEc:smx:journl:04:6:38
    as

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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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