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Revenue Slumps and Fiscal Capacity: Evidence from Brazil

Author

Listed:
  • Claudio Ferraz
  • Dirk Foremny
  • Juan Francisco Santini

Abstract

This paper investigates how non-tax revenues impact tax collection in Brazilian municipalities, focusing on shifts in intergovernmental transfers due to population updates. Our analysis reveals asymmetric effects of shocks: revenue gains lead to increased spending without tax reductions, while losses in transfers prompt investments in fiscal capacity and boost tax revenues. Enhancing fiscal capacity entails adjusting tax bureaucrat payments, improving property registries, and cracking down on delinquency, with heterogeneous responses based on political competition and the educational levels of local leaders and the bureaucracy. These findings emphasize the importance of rules that reduce the reliance on non-tax revenues and promote effective tax collection.

Suggested Citation

  • Claudio Ferraz & Dirk Foremny & Juan Francisco Santini, 2024. "Revenue Slumps and Fiscal Capacity: Evidence from Brazil," NBER Working Papers 32440, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32440
    Note: DEV PE POL
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    More about this item

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • P11 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Planning, Coordination, and Reform

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