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End of the line: The Effects of Intergovernmental Grants on Local Revenue: Evidence from Chile

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  • Javiera Bravo
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    Abstract

    This paper presents research on the effect of intergovernmental grants on local government revenue in Chile. Intergovernmental grants are endogenous and I exploit a kink in a component of the Chilean formula for resource distribution for a panel of 340 Chilean municipalities from 1990 to 2007. I find empirical evidence that for Chilean municipalities, intergovernmental grants have a negative effect on local revenue. Specifically, an increase in per capita grant amount of one standard deviation is associated with a decrease of between 0.25 and 0.32 standard deviations in local per capita revenue. This effect is not uniform for different kinds of local revenue.

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    File URL: http://www.economia.puc.cl/docs/dt_393.pdf
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    Bibliographic Info

    Paper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 393.

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    Date of creation: 2010
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    Handle: RePEc:ioe:doctra:393

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    Related research

    Keywords: Fiscal decentralization; intergovernmental grants; local government revenue; local collection; regression kink design;

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